Question

A bank offers 30-year, $210,000 mortgages at 5.3 percent and charges a $4,300 refundable loan application fee. The current disclosure law requires that any fees that will be refunded if the applicant is rejected be included in calculating the APR.

   

What is the APR that they are required to disclose? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

  

	Insecurity Bank and Trust (Refundable)
			%
APR			%

Answer 1

We can calculate the desired result in excel sheet as follows:

Borrowing = $ 210,000

Charges = $ 4,300

Total Borrowings = $ 210,000 + 4,300

= $ 214,300

Rate = 5.30%

Monthly Rate = 5.30 / 12

= 0.4417%

Period of Loan = 30 years

No. of Monthly installments = 30 * 12

= 360 payment

Formulas used in the excel sheet are:

So, the APR % comes out to be 5.48%.