Question: 9. Consider the following below market financing problem for two identical homes (assume monthly payments): A B Price $140,000 $120,000 Loan Balance $90,000 (assumable) $90,000

9. Consider the following below market financing problem for two identical homes (assume monthly payments):

A

B

Price

$140,000

$120,000

Loan Balance

$90,000

(assumable)

$90,000

(new loan)

Down payment

$50,000

$30,000

I

7%

8%

Term

20 Years

20 Years

  1. What is the rate of return on the $20,000 investment in the first alternative?

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