B purchases a small commercial property, and he finances it with a 65% loan. The lender charges 9.25% annual interest and three discount points. The discount points:

A. increase the mortgage payments
B. decrease the annual percentage rate
C. increase the fender's upfront yield
D. increase the nominal interest rate

Answer: C. increase the fender's upfront yield
Discount points are a percentage of the principal amount of a loan, collected by the lender at the same time the loan is originated, to give the lender an immediate yield over and above the interest. While other discount points decrease the nominal (promissory note) interest rate, they don't decrease the annual percentage rate; the APR takes the discount points into consideration.