Question
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
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?
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Intermediate Accounting IFRS
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
3rd edition
978-1119372936
