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What is the contractual yield

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Consider a $5,000,000, 8.5%, 30-year mortgage with monthly payments, and expected realistic prepayment horizon of 7 years. What is the contractual yield (effective interest rate) at issuance over the expected life of the loan under the following circumstances:

(a) No points or penalties

(b) One point of disbursement discount

(c) Three points of disbursement discount

(d) Three points of disbursement discount plus one point of prepayment penalty.

Reference no: EM133055970

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