question 6

A friend of yours, David, is seeking to obtain a Shs 3 million mortgage loan, repayable monthly in arrears. He has approached a lender who has provided him with two alternatives.

Alternative one: Declining balance loan Duration: Rate: Monthly repayment:	10 years 18% p.a Shs 54,055.56
Alternative two: Flat rate loan Duration: Rate:	10 years 9.5% p.a

What is the total interest payable in alternative one and the monthly repayment in alternative two respectively?

Select one:

A. Alternative one: Shs 3,486,667.20 and alternative two: Shs 48,750.00

B. Alternative one: Shs 5,400,000.00 and alternative two: Shs 48,75.00

C. Alternative one: Shs 5,400,000.00 and alternative two: Shs 27,375.00

D. Alternative one: Shs 3,486,667.20 and alternative two: Shs 27,375.00