Suppose that you have two loan choices with monthly payments

Choice Loan Amount Term $($years$)$ Interest Rate

$1$ $ $250,000305\%$

$2$ $ $220,000304\mathrm{.}50\%$

A$)$ What is the annual incremental borrowing cost for loan $1$ over loan $2$ if you hold the loan for the entire term, assuming there is no origination cost associated with the loans?

$3\mathrm{.}34\%$

$5\mathrm{.}34\%$

$8\mathrm{.}34\%$

$10\mathrm{.}34\%$

B$)$ If the origination costs for loans $1$ and $2$ are $$3,500$ and $$2,500$ respectively, and you hold the loan for $6$ years $(72$ months$),$ what is annual incremental borrowing cost of loan $1$ over loan $2?$

$5\mathrm{.}29\%$

$10\mathrm{.}29\%$

$8\mathrm{.}55\%$

$9\mathrm{.}29\%$