A Lender Gives You a $125,000 Thirty-Year Fixed-Rate Mortgage at 6.75%,three

Multiple Choice

A lender gives you a $125,000 thirty-year fixed-rate mortgage at 6.75%,three discount points,monthly payments.Suppose that,before you make any payments,you receive a pay raise so you pay an extra $100 per month in addition to your normal payment.Also,at the end of year five of the mortgage you have an unexpected job transfer thus the house is sold and the mortgage is repaid.The mortgage balance at the end of year five with the extra $100 per month payment is $110,231.What is the effective cost of the loan for the five-year holding period?

A) 7.45%
B) 7.93%
C) 5.74%
D) 7.51%
E) none of the above