Option 1: First Mortgage loan for $170,000 with an effective interest cost of 9%.

Option 2: First Mortgage loan for $150,000 with terms: 6%, 30 years &

Second Mortgage loan for $20,000 with terms: 12% 10 years.

The holding period is 5 years (note: The procedure varies slightly with the holding period selection). Mathematically demonstrate using PV analysis which option should be selected. Indicate whether option 1 or 2 should be taken.

A. Calculate Monthly Payments and Loan Balances for Option 2