California Real Estate Practice Exam

Payment of three points on a note whose rate is 6% will increase the yield to the lender to

1. 6%

2. 6 1/8%

3. 6 3/8%

4. 6 1/2%

The correct answer is: 6 3/8%

Increasing the payment on a loan can increase the yield to the lender. In this case, the rate of the note is 6% and increasing the payment by three points will result in a yield of 6 3/8%. This is because three points is equivalent to 0.75%, which added to the original 6% rate gives a new rate of 6.75%. To find the percentage yield, we subtract the original rate of 6% from the new rate of 6.75%, giving a yield of 0.75% or 6 3/8%. Options A and B are incorrect because they do not take into account the increase in payment, resulting in a lower yield. Option D is also incorrect because it is too high of a rate for an increase of only three points.