An investor has $60,000 to invest in a $280,000 property. He can obtain either a $220,000 loan at 9.5 percent for 20 years or a $180,000 loan at 9 percent for 20 years and a second mortgage for $40,000 at 13 percent for 20 years. All loans require monthly payments and are fully amortizing.

a1. What is the total monthly payment of the two loans?

$

a2. What is the cost of the combined loan?

%

a3. What is the cost of the single loan?

%

a4. Which alternative should the borrower choose, assuming he will own the property for the full loan term?

(Click to select) Combined Loans Single Loan