Question: 9. Ann is looking for a fully amortizing 30-year Fixed Rate Mortgage for $1,250,000 with monthly payments. Mortgage A has a 4.38% interest rate and

9. Ann is looking for a fully amortizing 30-year Fixed Rate Mortgage for $1,250,000 with monthly payments.

Mortgage A has a 4.38% interest rate and requires Ann to pay 1.5 points upfront.

Mortgage B does not require to pay any fees upfront.

Assuming Ann plans to make payments for 2 years and then immediately pay the remaining balance, what should be the interest rate on mortgage B to make Ann indifferent between these two mortgages? Hint: Ann only cares about IRR, so she is indifferent if IRRs are the same.

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