Question

What is the Effective Borrowing Cost (EBC) of a 30-Year $240,000 FRM Loan with a Contract...

What is the Effective Borrowing Cost (EBC) of a 30-Year $240,000 FRM Loan with a Contract Interest Rate of 6.00% w/ $4,000 in Closing Costs if the borrower prepays in 3 years? Please indicate your answer as an annual percentage with two digits right of the decimal, or 0.0342 --> 3.42.

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Answer #1

Effective cost of borrowing= 6.64%

Calculation as below:

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