
Elementary Math Fractions, Percentages, Word Problems, Equations, Inequations, Factorization, Expansion 
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January 31st, 2017, 06:25 PM  #1 
Newbie Joined: Jan 2017 From: Fresno Posts: 3 Thanks: 0  Need help with a math problem
Hi. I have a word problem and I am not sure where to post because I am new. But the question is this. A borrower on January 1st funded their loan for \$258,039.34. The rate of interest was 3.50% with an "interest only" amortization. On January 14th, just 14 days later the borrower repaid the loan in full, with a \$65 fee charged and collected as an early payment penalty. Q: What is the actual allin yield of return that was earned on the loan? Help :/ I know it's more than 3.50%! Last edited by skipjack; January 31st, 2017 at 06:41 PM. 
January 31st, 2017, 06:40 PM  #2 
Member Joined: Oct 2016 From: Melbourne Posts: 77 Thanks: 35 
Just to rewrite the question so it can be read... A borrower on January 1st funded their loan for \$258 039.34. The rate of interest was 3.50% with an "interest only" amortization. On January 14th, just 14 days later, the borrower repaid the loan in full, with a \$65 fee was charged and collected as an early payment penalty. What is the actual allin yield of return that was earned on the loan? I'm not sure all the information has been given. How often is the interest compounded? 
January 31st, 2017, 06:45 PM  #3 
Newbie Joined: Jan 2017 From: Fresno Posts: 3 Thanks: 0 
It is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.

January 31st, 2017, 06:46 PM  #4 
Global Moderator Joined: Dec 2006 Posts: 18,718 Thanks: 1533 
Did you realize that January 14th is 13 days after January 1st, not 14 days?

January 31st, 2017, 08:27 PM  #5 
Newbie Joined: Jan 2017 From: Fresno Posts: 3 Thanks: 0 
Ha! 14th day,,, 
January 31st, 2017, 10:34 PM  #6 
Global Moderator Joined: Dec 2006 Posts: 18,718 Thanks: 1533 
Work out the interest charged on the loan. If, say, that is \$325, you can calculate that the \$65 fee is a fifth of the interest amount and then increase 3.5% by a fifth to give the effective rate that you want to find. For accuracy, work to at least five significant figures.


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