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What is the lender yield from this loan

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Reference no: EM132923171

Question - Your bank has written a loan of $450,000 with an initial maturity of 30 years and an interest rate of 6.5% calculated monthly. As there are a variety of up-front costs associated with this loan, you have charged the borrower 1 point to cover these costs. You are expecting this loan to be paid out (prepayment) in 8 years, without any additional charges. Payments on this loan occur monthly. Allowing for the expected early repayment what is the lender's yield from this loan?

a. 6.5% per annum

b. 7.47% per annum

c. 6.80% per annum

d. 6.67% per annum

e. None of the above

Reference no: EM132923171

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