After$-$tax cost of debt Personal Finance Problem Bella Wans is interested in buying a new motorcycle. She has decided to borrow the money to pay the $$25,000$ purchase price of

the bike. She is in the $32\%$ income tax bracket. She can either borrow the money at an interest rate of $4\%$ from the motorcycle dealer, or she could take out a second mortgage on her

home. That mortgage would come with an interest rate of $9\%.$ Interest payments on the mortgage would be tax deductible for Bella, but interest payments on the loan from the

motorcycle dealer could not be deducted on Bella's federal tax return.

a$.$ Calculate the after$-$tax cost of borrowing from the motorcycle dealership.

b$.$ Calculate the after$-$tax cost of borrowing through a second mortgage on Bella's home.

c$.$ Which source of borrowing is less costly for Bella?

d$.$ Should Bella consider any other factors when deciding which loan to take out?

a$.$ The after$-$tax cost of borrowing from the motorcycle dealership is

$\%.($Round to the nearest whole percentage.$)$

b$.$ The after$-$tax cost of borrowing through a second mortgage is

$\%.($Round to two decimal places.$)$

c$.$ Which source of borrowing is less costly for Bella? $($Select the best answer below.$)$

A$.$ Bella should borrow by taking the dealership loan.

B$.$ Both loans have the same rate of $32\%,$ so Bella should choose the loan she likes best.

C$.$ Both loans have the same rate of $32\%,$ so Bella should not take either loan.

D$.$ Bella should borrow by taking the second mortgage.