David Abbot is buying a newhouse, and he is taking out a 30-year mortgage. David will borrow

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David Abbot is buying a newhouse, and he is taking out a 30-year mortgage. David will borrow $205,000 from abank, and to repay the loan he will make 360 monthly payments(principal andinterest) of $1,340.27 per month over the next 30 years. David can deduct interest payments on his mortgage from his taxableincome, and based on hisincome, David is in the 30% tax bracket.

a. What is thebefore-tax interest rate(per year) onDavid's loan?

b. What is theafter-tax interest rate that David ispaying?

Posted Date: May 19, 2024 02:02 PM

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David Abbot is buying a newhouse, and he is taking out a 30-year mortgage. David will borrow

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