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A borrower is faced with choosing between two loans, Loan A is available for $75,000 at 6% interest for 30 years, with 3 points to
- A borrower is faced with choosing between two loans, Loan A is available for $75,000 at 6% interest for 30 years, with 3 points to be included in closing costs. Loan B would be made for the same amount, but for 6.5% interest for 30 years, with zero points to be included in the closing costs. Both loans will be fully amortizing.
- If the loan is repaid after 20 years, what are the effective interest rates (i.e. effective cost of borrowing) of loan A and B? Which loan would be the better choice?
- If the loan is repaid after 10 years, what are the effective interest rates (i.e. effective cost of borrowing) of loan A and B? Which loan is the better choice?
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Short Term Financial Management
Authors: John Zietlow, Matthew Hill, Terry Maness
5th Edition
1516512405, 9781516512409
