EC #2

Ms. Madison has an existing loan with payments of $782.34. The interest rate on the

loan is 10.5% and the remaining loan term is 10 years. The current balance of the loan

is $57,978.99. The home is now worth $120,000 and Ms. Madison would like to borrow

an additional $30,000 through a wraparound loan which would increase the debt to

487,978.99. Terms of the wraparound loan are 12.25% interest with monthly payments

for 10 years. What is the incremental cost of borrowing the extra $30,000 through a

wraparound loan?