Question

Ruby obtains a $500,000 fully amortizing CPM loan with a 3.25 percent interest rate and term...

Ruby obtains a $500,000 fully amortizing CPM loan with a 3.25 percent interest rate and term of 30 years. The loan includes 2 points in upfront fees. If Ruby expects to sell the house and repay the loan in 12 years, what is the EIR on the loan?

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Answer #1

It is assumed that original loan term is to amortize in 30 years, by annyual payments.

Effective Annual Rate = 3.483451%

Calculation as below:

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