You have a choice between the following two identical properties: Property A is priced at

$150,000 with 80 percent financing at a 10.5 percent interest rate for 20 years. Property B is

priced at $160,000 with an assumable mortgage of $100,000 at 9 percent interest with

20 years remaining. Monthly payments are $899.73. A second mortgage for $20,000 can be

obtained at 13 percent interest for 20 years. All loans require monthly payments and are fully

amortizing.

a. With no preference other than financing, which property would you choose?

b. How would your answer change if the seller of Property B provided a second mortgage for

$20,000 at the same 9 percent rate as the assumable loan?

c. How would your answer change if the seller of Property B provided a second mortgage for

$30,000 at the same 9 percent rate as the assumable loan so

that no additional down payment

would be required by the buyer if the loan were assumed?