An investor has $60,000 to invest in a $280,000 property. He can obtain either a $220,000 loan at 9.5% for 20 years or a $180,000 loan at 9% for 20 years and a second mortgage for $40,000 at 13% for 20 years. All loans require monthly payments and are fully amortized. (round to 3 decimal places when calculating rates)

a. Which alternative should the borrower choose, assuming he will own the property for the full loan term? (answer should be A or B)

i. A single 220,000 loan or B 180,000 loan AND the second mortgage for 40,000

b. What if the second mortgage had a 10 year term? HINT: you have a change in payment cost now that the second mortgage is only 10 years (uneven cash flows --> Use IRR) (answer should be A or B)