A borrower can obtain an 80 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 90 percent loan at an 7.5 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.) (Round your final answer to 2 decimal places.)

b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 90 percent loan? (Round your final answer to 2 decimal places.)

c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years? (Round your final answer to 2 decimal places.)