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 a better choice?

(b) If the loan is repaid after ve years, which loan is the better choice?

(show workings)