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Ann is looking for a fully amortizing 30-year Fixed Rate Mortgage with monthly payments for $1,500,000. Mortgage A has a 7.05% interest rate and requires
Ann is looking for a fully amortizing 30-year Fixed Rate Mortgage with monthly payments for $1,500,000.
Mortgage A has a 7.05% interest rate and requires Ann to pay 1.5 points upfront.
Mortgage B has a 9% interest rate and requires Ann to pay zero fees upfront.
Assuming Ann makes payments for 2 years before she sells the house and pays the bank the balance, which mortgage has the lowest cost of borrowing (ie lowest annualized IRR)? Type 1 for A, type 2 for B.
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Corporate Finance A Focused Approach
Authors: Michael C. Ehrhardt, Eugene F. Brigham
8th Edition
0357714636, 9780357714638
