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?

2,050.69 incorrect.

a2. What is the cost of the combined loan?

9.74 correct.%

a3. What is the cost of the single loan?

9.67 incorrect.%

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

Single Loan Correct