Consider a 20-Year (Monthly-Payment), 8%, $80,000 Mortgage with 2 Points

Multiple Choice

Consider a 20-year (monthly-payment) , 8%, $80,000 mortgage with 2 points prepaid interest up front. What is the "effective interest rate" or yield over the borrower's expected holding period if the borrower expects to hold the loan for 12 years?

A) 8.00%
B) 8.25%
C) 8.31% N=240, I=8, PV=80000, FV=0; PMT= -669.15; 144=N; FV=-47344; RCL PV = 80000*0.98 = 78400 = PV; I = 8.31%.
D) 8.56%