Answer Happy

Problem 4-15
A lender is considering what terms to allow on a loan. Current
market terms are 9 percent interest for 25 years for a fully
amortizing loan. The borrower, Rich, has requested a loan of
$103,000. The lender believes that extra credit analysis and
careful loan control will have to be exercised because Rich has
never borrowed such a large sum before. In addition, the lender
expects that market rates will move upward very soon, perhaps even
before the loan is closed. To be on the safe side, the lender
decides to extend to Rich a CPM loan commitment for $97,850 at 9
percent interest for 25 years; however, the lender wants to charge
a loan origination fee to make the mortgage loan yield 10
percent.
Required:
a. What origination fee should the lender
charge?
b. What fee should be charged if it is
expected that the loan will be repaid after 10 years?
(For all requirements, do not round intermediate
calculations and round your final answers to 2 decimal
places.)
a. loan origination fee - 25 year loan
b. loan origination fee - 10 year
loan