1 answer

If the lender charges upfront points on a loan, what effect will prepayment of the loan...

Question:

If the lender charges upfront points on a loan, what effect will prepayment of the loan have on the lender?

Question 5 options:

1)

higher yield for the lender

2)

lower yield for the lender

3)

not enough information

4)

none of the above

Answers

Points are percentage of loan paid upfront. In this kind of situations, if loan is paid off early effective yield will increase. Interest paid and points paid will increase the yield on loan to borrower.

Hence, correct option is (1) higher yield for the lender.

.

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