A borrower has the choice between two mortgage loans Both are to be amortized by monthly payments over 10 years A mortgage broker will charge a fee of $2200 for an $82,200 face value loan at 10 25 compounded semiannually A trust company will grant an $80,000 loan (with no other fees) at 10 75 compo...

The payments on the loan from the mortgage broker are based on PV 82200 i 1025 2 5125 n 1 ...

A borrower has the choice between two mortgage loans. Both are to be amortized by monthly payments

Question:

A borrower has the choice between two mortgage loans. Both are to be amortized by monthly payments over 10 years. A mortgage will charge a fee of $2200 for an $82,200 loan at 10.25% compounded semiannually. A trust company will grant an $80,000 loan (with no other fees) at 10.75% compounded semiannually. Determine which loan has the lower effective annual cost of borrowing if the contractual interest rates are for
a. A 5-year term.
b. The entire 10-year amortization period. Broker
A broker is someone or something that acts as an intermediary third party, managing transactions between two other entities. A broker is a person or company authorized to buy and sell stocks or other investments. They are the ones responsible for... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...