Hi, Have a finance 311 question: You are looking at a one-year loan of $200,000. The interest rate is quoted as 6 percent plus 5 points.

Hi, Have a finance 311 question: 

  • You are looking at a one-year loan of $200,000. The interest rate is quoted as 6 percent plus 5 points. A point on a loan is simply 1 percent (one percentage point) of the loan amount. Quotes similar to this one are very common with home mortgages. The interest rate quotation in this example requires the borrower to pay 5 points to the lender up front and repay the loan later with 6 percent interest. What is the actual rate you are paying on this loan?

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