If a $1,500,000 loan is issued with 5 discount points and an 8% interest rate, what is the original annual payment?

To determine the original annual payment for a $1,500,000 loan with an 8% interest rate, we need to calculate the annual payments based on the loan amount and interest rate, ignoring the impact of discount points for this calculation purpose.

First, applying the formula for calculating the annual payment on a fully amortizing loan is essential. The formula is:

[

M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1}

]

Where:

• (M) is the monthly payment,

• (P) is the loan principal ($1,500,000 in this case),

• (r) is the monthly interest rate (annual interest rate divided by 12),

• (n) is the number of payments (loan term in months).

For a loan with an 8% annual interest rate, the monthly interest rate is:

[

r = \frac{8%}{12} = \frac{0.08}{12} = 0.0066667

]

Assuming a typical loan term of 30 years, the number of payments (n) would be:

[

n = 30 \