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A borrower takes out a 20-year mortgage for $500,000 with an interest rate of 6%. The...

A borrower takes out a 20-year mortgage for $500,000 with an interest rate of 6%. The loan requires monthly payments and has a 3% fee if the loan is repaid within 10 years. What is the effective interest rate on the loan if the borrower repays the loan after 72 payments?

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Answer #1

Formulas Used:-

Monthly Installment=PMT(B63,B62,-B61)


Balance after 72 installment=FV(B63,72,B65,-B61)


penalty to be paid=B66*3%


Effective rate(Monthly)=RATE(72,-B65,B61,-B66-B67)


Effective rate(yearly)=(1+B68)^12-1

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