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A homebuyer can obtain an $80,000 loan at 8.5% or obtain a $90,000 loan at 9%. The incremental cost of borrowing the additional $10,000 is
A homebuyer can obtain an $80,000 loan at 8.5% or obtain a $90,000 loan at 9%. The incremental cost of borrowing the additional $10,000 is 12.8%. Alternatively, a second loan for $10,000 can be obtained at 10%. What is the best alternative for obtaining the additional $10,000? Group of answer choices
a.) Borrow $80,000 at 8.5% and obtain a second mortgage for $10,000 at 10%.
b.)Borrow $90,000 at 9%.
c.) It is not worth borrowing the additional $10,000
d.) None of these
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