A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 6
Question:
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.
a. If the loan is repaid after 20 years, which loan would be the better choice?
b. If the loan is repaid after five years, which loan is the better choice?
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a In order to find which loan is the better choice after 20 years the effective interest rate for ea...View the full answer
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Related Book For 
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher
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