used to increase the lender's rate of return on its investment.

For example, the interest rate that a lender charges for a loan might be less than the yield an investor demands. To make up the difference the lender charges the borrower discount points. The number of points charged depends on two factors:

• difference between the loan's stated interest rate and the yield required by the lender.
• how long the lender expects it will take the borrower to pay off the loan.