For the two loans below, determine the amount of the effective obligation to the borrower for each loan, and indicate which is better for a borrower with a 18 percent opportunity cost:

Loan A:

Amount: $150,000

Term: 30 years

Interest rate: 4.5%

Expected holding period: 8 years

Cost of origination: 5% of loan

Loan B:

Amount: $150,000

Term: 15 years

Interest rate: 4%

Expected holding period: 8 years

Cost of origination: 5% of loan