14: Additional Examples 193
File name : English-M02-1-040308(Print).doc Print data : 2004/3/9
Step 3: Enter actual, current values for
N and PV; then find new I%YR
for discounted mortgage with balloon.
Keys: Display: Description:
R
-
42
Stores number of
payments remaining in
5-year loan.
79000
&
Stores proposed,
discounted purchase price
(new present value).
Calculates percent annual
yield.
Annual Percentage Rate for a Loan with Fees
See appendix F for RPN keystrokes for the next two examples.
The
annual percentage rate, APR, incorporates fees usually charged
when a mortgage is issued, which effectively raises the interest rate. The
actual amount received (the
PV) by the borrower is reduced, while the
periodic payments remain the same. The APR can be calculated given
the term of the mortgage (
N periods), the annual interest rate (I%YR), the
mortgage amount (new
PV), and the basis of the fee charged (how the
fee is calculated).
Remember the cash-flow sign convention: money paid out is negative,
money received is positive.
Example: APR for a Loan with Fees. A borrower is charged two points
for the issuance of a mortgage. (One point is equal to 1% of the
mortgage amount.) If the mortgage amount is $60,000 for 30 years
and the interest rate is 11½% annually with monthly payments, what
APR is the borrower paying?
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