1. Leslie and Ben are interested in a $250,000 fully amortizing loan and are deciding between 2 options, mortgage A and mortgage B

Mortgage A	Mortgage B
Loan term: 30 years Annual interest rate: 5.75 % Monthly payments Up-front financing costs: $4,500 Discount points: 2.5	Loan term: 15-years Annual interest rate: 5.25 % Monthly payments Up-front financing costs: $7,500 Discount points: 2.5

1. Calculate the monthly payments for mortgage A and B.

Mortgage A - Monthly payment =

Mortgage B - Monthly payment =

2. Calculate the effective borrowing cost for or mortgage A and B.

Mortgage A - EBC =

Mortgage B - EBC =

3. Calculate Lenders Yield for or mortgage A and B

Mortgage A - Lenders Yield =

Mortgage B - Lenders Yield =

d. Suppose you are the borrower. Based on the effective borrowing costs, which loan would you choose?

(Your answer should be "A" or "B")

The borrower would choose Mortgage

e. Suppose you are the lender. Based on the lenders yield, which loan would you choose?

(Your answer should be "A" or "B")

The lender would choose Mortgage