1.Since the payment amount is not given, calculate it (PMT) first. Use the given mortgage amount (PV = $60,000) and interest rate (I%YR = 111/2%).

2.To find the APR (the new I%YR), use the PMT calculated in step 1 and

adjust the mortgage amount to reflect the points paid (PV = $60,000 － 2%). All other values remain the same (term is 30 years; no future value).

Keys:

@c e

30@

11.5

60000

0

R

v-2%

Display:

Description:

If necessary, sets 12

payments per year and

End mode.

 

   

 



Figures and stores number

 

of payments.

Stores interest rate and



amount of loan.



No balloon payment, so

 

future value is zero.



Borrower’s monthly

 

payment.

Stores actual amount of

money received by



borrower into PV.



Calculates APR.

Example: Loan from the Lender’s Point of View. A $1,000,000, 10-year, 12% (annual interest) interest-only loan has an origination fee of 3 points. What is the yield to the lender? Assume that monthly payments of interest are made. (Before figuring the yield, you must

194 14: Additional Examples

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