Question
In: Finance
A borrower is faced with choosing between two loans. Loan A is available for $75,000 at...
A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 6.5% interest for 30 years, with 3% loan origination fee. Loan B would be made for the same amount, but for 7% interest for 30 years, with 0.5% loan origination fee. 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 5 years, which loan is the better choice?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
SHOW CLEAR WORK ON EXCEL A borrower is faced with choosing between two loans. Loan A...
SHOW CLEAR WORK ON EXCEL
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...
A borrower is purchasing a property for $725,000 and can choose between two possible loan alternatives....
A borrower is purchasing a property for $725,000 and can choose
between two possible loan alternatives. The first is 85% LTV loan
for 30 years at 3.5% interest and 1 point and the second is at 70%
LTV loan for 30 years at 2.875% interest and no points. Assuming
the loan will be held until maturity, what is the incremental cost
of borrowing the extra money?
A) 6.14%
B) 6.7%
C)6.33%
D)7.74%
A borrower is purchasing a property for $725,000 and can choose between two possible loan alternatives....
A borrower is purchasing a property for $725,000 and can choose
between two possible loan alternatives. The first is an 85% loan
for 30 years at 3.5% interest and 1 point and the second is a 70%
loan for 30 years at 2.875% interest and no points. Assuming the
loan will be repaid in 5 years, what is the incremental cost of
borrowing the extra money?
A. 6.14%
B. 6.7%
C. 6.33%
D. 7.74%
20) A borrower is purchasing a property for $180,000 and can choose between two possible loan...
20) A borrower is purchasing a property for $180,000 and can
choose between two possible loan alternatives. The first is a 90%
loan for 25 years at 9% interest and 1 point and the second is a
95% loan for 25 years at 9.25% interest and 1 point. Assuming the
loan will be repaid in 5 years, what is the
incremental cost of borrowing the extra money? A) 13.95% B) 13.67%
C) 14.42% D) 12.39%.
I know the answer is...
A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives....
A borrower is purchasing a property for $180,000 and can choose
between two possible loan alternatives. The first is a 80% loan for
25 years at 8% interest and 1 point and the second is a 95% loan
for 25 years at 9.25% interest and 2 points. Assuming the loan will
be held to maturity, what is the incremental cost of borrowing the
extra money?
When purchasing a $260,000 house, a borrower is comparing two loan alternatives. The first loan is...
When purchasing a $260,000 house, a borrower is comparing two
loan alternatives. The first loan is a 90% loan at 8.5% for 25
years. The second loan is an 85% loan for 7.75% over 15 years. Both
have monthly payments and the property is expected to be held over
the life of the loan. What is the incremental cost of borrowing the
extra money?
When purchasing a $260,000 house, a borrower is comparing two loan alternatives. The first loan is...
When purchasing a $260,000 house, a borrower is comparing two
loan alternatives. The first loan is a 90% loan at 8.5% for 25
years. The second loan is an 85% loan for 7.75% over 15 years. Both
have monthly payments and the property is expected to be held over
the life of the loan. What is the incremental cost of borrowing the
extra money?
could you please show the work
You are considering between two loans. Assume everything between these two loans is the same except...
You are considering between two loans. Assume everything between
these two loans is the same except for the interest rate. Loan A
offers 5.5% compounded weekly. Loan B offers 5.64% compounded
semiannually. Which loan is better and why?
Loan A because the actual rate is 5.65% is lower than Loan B’s
actual rate.
Loan A because 5.5% is lower than Loan B’s 5.64%.
Loan B because the actual rate is 5.72% is higher than Loan A’s
actual rate.
Loan B...
You currently have two loans outstanding: a car loan and a student loan. The car loan...
You currently have two loans outstanding: a car loan and a
student loan. The car loan requires that you pay $329 per month,
starting next month for 28 more months. Your student loan is
requires that you pay $145 per month, starting next month for the
next 119 months.
A debt consolidation company gives you the following offer: It
will pay off the balances of
your two loans today and then charge you $487 per month for the
next 41...
You currently have two loans outstanding: a car loan and a student loan. The car loan...
You currently have two loans outstanding: a car loan and a
student loan. The car loan requires that you pay $325 per month,
starting next month for 26 more months. Your student loan is
requires that you pay $87 per month, starting next month for the
next 38 months.
A debt consolidation company gives you the following offer: It
will pay off the balances of
your two loans today and then charge you $501 per month for the
next 45...
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