Effective yield represents what in a mortgage context?

Effective yield in a mortgage context refers to the rate actually received by the lender after accounting for various factors such as loan fees, points, and other costs associated with the loan. It provides a more accurate picture of the lender's return on investment compared to the nominal interest rate that may be charged to the borrower.

While the interest rate that the borrower pays is significant, it does not encompass all the costs involved in the transaction that affect the lender's actual earnings. The effective yield takes these additional costs and the specifics of the loan structure into account, making it a crucial figure for lenders in assessing the profitability of the mortgage they are providing.

The total loan amount is simply the principal amount lent and does not relate to the yield or the lender’s earnings. Similarly, the fees charged by the lender, while they contribute to the overall costs, do not fully represent the effective return since they can vary widely and do not reflect the performance of the loan over time. Thus, option B is the most accurate depiction of what effective yield represents in this context.