Question: A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10% MEY for 30 years, with 6 points included

A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10% MEY for 30 years, with 6 points included in the closing costs. Loan B would be made for the same amount, but for 11% MEY for 30 years, with 2 points included in the closing costs. Both loans would be fully amortizing.

[1] If the loan is to be repaid after 15 years, which is the better choice?

[2] If the loan is repaid after 5 years, which is the better choice?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

You have had a 30yr FA FRM at 10% for 5 years. The original principal was 1,000,000. You are considering a cash-out refi into a 15-year mortgage at 7.5%. The old mortgage has a prepay penalty of 3%...

A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10% MEY for 30 years, with 6 points included in the closing costs. Loan B would be made for the same amount,...

3. [6 pts] A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10% MEY for 30 years, with 6 points included in the closing costs. Loan B would be made for the same...

A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10% MEY for 30 years, with 6 points included in the closing costs. Loan B would be made for the same amount,...

14. A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10 percent interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for...

A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10 per- cent interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for the...

Please show your work with the calculation. Thank you. A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10 percent interest for 30 years, with 6 points to be...

A borrower is faced with choosing between two loans. Loan A is available for S1,875,000 at 10 percent interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for...

please provide the answer in excel spreadsheet 2- Rob is faced with choosing between two loans. Loan A is available for $80,000 at 7% for 30 years, with 6 points to be including in closing costs....

Rob is faced with choosing between two loans. Loan A is available for $80,000 at 7% for 30 years, with 6 points to be including in closing costs. Loan B would be for the same amount, but with 8%...

Recruitment and selection at Enterprise Rent-A-Car Case Study Questions 1. Identify three reasons why Enterprise uses workforce planning. 2. In a competitive market, what does Enterprise do...

What are some examples of internal drivers of an organization's risk culture? Resource allocation, risk attitude, risk appetite, risk tolerance, employee records 2) What are some examples of external...

Your swings account pays 1 0 . 9 8 % interest rate, compounded semi - annually. Which of the following is true? The periodic rate of inberest in 5 . 0 0 % and the eftecther rate of interest is 1 0 ....

Which of the following are problems with identifying users of ABC? Multiple select question. ABC means different things to different organizations. Organizations will announce the discontinuance of...

2. One union newspaper indicated how it saved an employees job. The employee was in the mechanics classification and was discharged for refusing to comply with managements sudden, unilateral rule...

broadening cross-cultural analysis to include an understanding of integrationdifferentiation in global managing;

developing the relevance of cross-cultural studies through an incorporation of stakeholder analysis of particular interaction situations;