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Effective annual cost of borrowing in percent

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Reference no: EM131213929

Suppose you borrow $300,000 at 7% for 30 years with 0 points. Suppose also that the mortgage note includes a prepayment penalty of 1% of the mortgage balance if the mortgage is prepaid within 10 years.

What is the effective annual cost of borrowing in percent (i.e., annual effective interest rate) if the loan is repaid 5 years after origination?

[Hint: Use Excel for this question].

Reference no: EM131213929

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