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QUESTION FOUR A group of investors would like to purchase a property worth Kshs.140 million. They are considering two financing alternatives. The first is an

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QUESTION FOUR A group of investors would like to purchase a property worth Kshs.140 million. They are considering two financing alternatives. The first is an 80%, 30 year, fixed rate mortgage at 7%, interest payable monthly. The second option is 70%, 30 year, fixed rate mortgage at 6% interest payable monthly. The lender will charge loan origination fees of 5% for both alternatives. The investors holding period is 30 years. Required: Which of the two alternatives would you recommend? (25 marks)

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