Answered step by step
Verified Expert Solution
Question
1 Approved Answer
what is the effective rate of the second option over 10 years? How do you solve for this using a financial calculator and not in
what is the effective rate of the second option over 10 years? How do you solve for this using a financial calculator and not in excel?
You are choosing between two mortgage options for a $1,000,000 property. The first option is a 60% LTV mortgage at an interest rate of 8%. This loan is an interest only loan, and it also charges a 1.5% origination fee. The second option consists of two loans combined together. The primary loan (first mortgage) is a 50% LTV loan at an interest rate of 6.5%. This loan computes the payment as if it were a 30 year mortgage, but the mortgage balance is actually due in 10 years and the loan charges a 1% origination fee. The secondary loan for this option is a 10% LTV loan at an interest rate of 10%. This loan is interest only and is also due in 10 years and charges a 3% origination fee. What is the effective rate of the second option over 10 years? a. 8.2415% b. 7.3111% c. 7.1593% d. 6.954%Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started