A bank offers you two rates. The first is a 5% rate on a 30 year...

A bank offers you two rates. The first is a 5% rate on a 30 year self liquidating mortgage for 75% of the 400,000 value. The second option is 7.5% for 90% financing also on 30 year amortization. What is the marginal cost of borrowing

How do I do this in financial calculator please explain. Below is the answer and step but I do not understand it. Help me please.

Deal 1		Deal 2		Differnce
Amortization	30	Amortization	30	30
Term	30	Term	30
Rate	5.0%	Rate	7.5%
Value	$400,000	Value	$400,000
LTv	75.0%	LTv	90.0%
Loan	$300,000	Loan	$360,000	$60,000
Payment	($1,610.46)	Payment	($2,517.17)	-$907
Rate				18.05%
subtract the loan amount of 1 from deal 2
subract the paymnet of deal 1 from deal 2
Calculate rate for additional dollars given additional payment over the term.

Expert Solution

jeff jeffy answered 2 years ago

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