Ch $4$ Assignment

$2$

Problem $4-16$

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A borrower is faced with choosing between two loans. Loan $A$ is available for $$75,000$ at $6$ percent interest for $30$ years, with $6$ points to be included in closing costs. Loan B would be made for the same amount, but for $7$ percent interest for $30$ years, with $2$ points to be included in the closing costs. Both loans will be fully amortizing.

Required:

a$.$ If the loan is repaid after $20$ years, what is the effective interest rate for Loan A and Loan B$?$

b$.$ If the loan is expected to be repaid after five years, what is the effective interest rate for Loan A and Loan B$?$

Complete this question by entering your answers in the tabs below.

Required $A$

Required B

If the loan is repaid after $20$ years, what is the effective interest rate for Loan A and Loan $B?$

Note: Do not round intermediate calculations. Round your final answer to $2$ decimal places.

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Problem $4-16$

A borrower is faced with choosing between two loans. Loan $A$ is available for $$75,000$ at $6$ percent interest for $30$ years, with $6$ points to be included in closing costs. Loan B would be made for the same amount, but for $7$ percent interest for $30$ years, with $2$ points to be included in the closing costs. Both loans will be fully amortizing.

Required:

a$.$ If the loan is repaid after $20$ years, what is the effective interest rate for Loan A and Loan $B?$

b$.$ If the loan is expected to be repaid after five years, what is the effective interest rate for Loan A and Loan $B?$

Complete this question by entering your answers in the tabs below.

Required $A$

Required B

If the loan is repaid after $20$ years, what is the effective interest rate for Loan A and Loan B$?$

Note: Do not round intermediate calculations. Round your final answer to $2$ decimal places.

$\backslash$table$[[,$Loan A$,$Loan B$],[$Effective interest rate,$6\mathrm{.}37,\%,7\mathrm{.}14]]$

$***$NOTE: the $7\mathrm{.}14$ is correct, also need to find $2$ values for the interest rates if the loan is repaid in $5$ years