Question: What is your effective borrowing cost (EBC) if you plan to move in 5 years? Situation: a lender is offering you a $300,000 30-year FRM

  1. What is your effective borrowing cost (EBC) if you plan to move in 5 years?

Situation: a lender is offering you a $300,000 30-year FRM at 7.2%.

This is how you solve for monthly payment over life of loan:

PV= 300,000

I= 7.2/12

N= 30 x 12 = 360 mo

FV= 0 (b/c fully amortizes)

PMT= $2,036.36

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