Question: Consider the following below market financing problem for two identical properties: A B Price $130,000 $115,000 Loan Balance $80,000 (assumable) $80,000 (new loan) Down payment

Consider the following below market financing problem for two identical properties:

A

B

Price

$130,000

$115,000

Loan Balance

$80,000

(assumable)

$80,000

(new loan)

Down payment

$50,000

$35,000

I

7%

8%

Term

20 Years

20 Years

  1. What is the monthly payment for each loan option?
  2. What is the rate of return on the $15,000 investment in the first alternative? Does this seem attractive from the viewpoint of an investor?

Does anybody know how to solve these two problems with details?

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