Question

. a loan with the following terms is being made:fixed-rate, constant monthly payment. closing date february 9th.five percent interest rate. prepaid interest is due at closing.$70,000 mortgage loan amount.$1,500 loan discount points to be paid by the buyer/borrower to the lender.25-year term, monthly payments, fully amortizing.a. calculate the apr for federal truth-in-lending purposes.

Answer 1

The APR for Federal Truth-in-Lending purposes is a measure of the cost of credit on a yearly basis, including interest rate and other fees. To calculate the APR, you need to consider the loan amount, interest rate, loan discount points, and term of the loan. In this case, the APR for the loan would be approximately 5.16%.

Step-by-step explanation:

The Annual Percentage Rate (APR) for Federal Truth-in-Lending purposes is a measure of the cost of credit that reflects the total cost of borrowing on a yearly basis, including both the interest rate and other fees associated with the loan.

To calculate the APR, you need to take into account the loan amount, interest rate, loan discount points, and the term of the loan. In this case, the loan amount is $70,000, the interest rate is 5%, the loan discount points are $1,500, and the term is 25 years.

Using these values, you can calculate the APR using the following formula:

1. 
   
3. Calculate the total amount of interest paid over the term of the loan by multiplying the loan amount by the interest rate.
4. 
   
6. Subtract the loan discount points from the loan amount to get the net loan amount.
7. 
   
9. Calculate the monthly payment using the net loan amount, term, and interest rate.
10. 
    
12. Calculate the present value of the monthly payment using the APR as the interest rate, term, and loan amount.
13. 
    
15. Find the discount rate that makes the sum of the present values of the monthly payments equal to the net loan amount.

By plugging in the values, the calculated APR for this loan would be approximately 5.16%.