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An investor has owned a property for 1 5 years, the value of which is now to $ 2 0 0 , 0 0 0

An investor has owned a property for 15 years, the value of which is now to $200,000. The balance on the original mortgage is $100,000 and the monthly payments are $1,100 with 15 years remaining. The investor would like to obtain $50,000 in additional financing. A new first mortgage for $150,000 can be obtained at a 12.5 percent rate. A new second mortgage for $50,000 can be obtained at a 14 percent rate with a 15-year term. Alternatively, a wraparound loan for $150,000 can be obtained at a 12 percent rate and a 15-year term. All loans are fully amortizing.
Required:
What is the incremental return on the wraparound loan?
What is the effective cost of the combination of the existing mortgage and the new second mortgage?
Which alternative is better for the borrower?

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