Question: Solve Exercise 1: (4 Marks) Assume a borrower is purchasing a property for SAR 500,000 and faces two possible loan alternatives. A lender is willing

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Exercise 1: (4 Marks) Assume a borrower is purchasing a property for SAR 500,000 and faces two possible loan alternatives. A lender is willing to lend a SAR 400,000 first mortgage loan for 10 years at 6% interest. The same lender is willing to lend SAR 450,000 for 10 years at 8%. Both loans will have fixed interest rates and constant payment mortgages. 1- The monthly payment (PMT) of the SAR 400,000 loan is equal to (in SAR): a- 4,440.82 b- 6,526.82 c- 5,344.82 d- 3,658.82 2- The monthly payment (PMT) of the SAR 450,000 loan is equal to (in SAR): a- 4,4440.82 b- 6,526.82 c- 5,459.74 d- 3,658.82 3- Calculate the incremental cost of borrowing: a- 16% b- 8% c- 21.57% d- 1.79% . . . ......... . . .

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