You are considering the following fixed interest rate mortgage loan alternatives:

Alternative 1:

$180,000 initial loan balance

4.00% annual nominal interest rate

30-year amortization schedule

$859.35 monthly loan payment

Alternative 2:

$195,000 initial loan balance

4.25% annual nominal interest rate

30-year amortization schedule

$959.28

What is incremental cost of borrowing the additional $15,000?

ANSWER CHOICES:

0.58%

4.25%

5.8%

7.01%