You are looking at a one-year loan of $10,000 The interest rate is quoted as 9 p

Question

You are looking at a one-year loan of $10,000 The interest rate is quoted as 9 percent plus three points A point on a loan is simply 1 percent (one percentage point) of the loan amount Quotes similar to this one are common with home mortgages The interest rate quotation in this example requires the borrower to pay three points to the lender up front and repay the loan later with 8 percent interest What rate would you actually be paying here? (Hound your answer to 2 decimal places, (e.g., 32.16)) Interest rate % References eBook & Resources Worksheet Difficulty Challenge Check my work

Explanation / Answer

Interest rate = (Annual Interest Expenses/(Loan - Upfront fee))

Interest rate =( 9%*10000 )/(10000-10000*3%)

Interest rate = 9.28%

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