Question 1
Some home loans involve "points," which are fees charged by the lender. Each point charged means that the borrower must pay 1% of the loan amount as a fee. For example, if 0.5 point is charged on a $100,000 loan, the loan repayment schedule is calculated on the $100,000 loan, but the net amount the borrower receives is only $99,500. What is the effective annual interest rate charged on such a loan, assuming that loan repayment occurs over 360 months, and that the interest rate is 12% per year?
Question 2
One service provided by check cashing services is to cash your check the night before you could otherwise receive your money if you were to deposit it into a bank account. However, a fee is attached to this service.
Let’s say you were to bring your $500 pay check to receive your cash one day early, but you need to pay a $1 fee in order to do so (in other words, you receive $499). What is the APR you paid on this transaction? What is the APY?