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Expected holding period

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Consider a $75,000, 30-year, fixed-rate mortgage with 7.75 percent interest and monthly payments. The lender requires that the borrower pay two points to originate the loan.

a) If the expected holding period is 30 years, what is the effective interest rate on this loan?

b) How does the effective interest rate if the expected holding period is 10 years?

c) What is the effective interest rate if the expected holding period is 30 years and no points are charged?

d) What is the effective interest rate if the expected holding period is 10 years and no points are charged?

Reference no: EM131222360

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