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You plan to borrow $500,000 and expect to sell the house after 3 years. The bank offers you two 20-year fixed rate annual payment mortgage

You plan to borrow $500,000 and expect to sell the house after 3 years. The bank offers you two 20-year fixed rate annual payment mortgage choices: A. zero point/8%; B. two points/7%.

Assume the discount rate is 6% (assume no tax rate). Which choice you should choose? How much present value of interest can you save by choosing one against the other?

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