A borrower can obtain an $85$ percent loan with an $7$ percent interest rate

and monthly payments. The loan is to be fully amortized over $25$ years.

Alternatively, he could obtain a $95$ percent loan at an $7\mathrm{.}5$ percent rate with

the same loan term. The borrower plans to own the property for the entire

loan term.

Required:

a$.$ What is the incremental cost of borrowing the additional funds? $($Hint$.$ The dollar amount of the loan does not affect the answer.$)$

b$.$ What is the incremental cost of borrowing the additional funds if $2$ points

were charged on the $95$ percent loan?

c$.$ What is the incremental cost of borrowing the additional funds if the

borrower planned to own the property for only five years?