A borrower is faced with choosing between two loans. Loan A is available for $76,000 at 6 percent interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for the sam amount, but for 7 percent interest for 30 years, with 2 points to be included in the closing costs. Both loans will be fully amortizing. Required: a. If the loan is repaid after 20 years, which loan would be the better choice? b. If the loan is repaid after five years, which loan is the better choice?
A borrower is faced with choosing between two loans. Loan A is available for $76,000 at 6 percent interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for the sam amount, but for 7 percent interest for 30 years, with 2 points to be included in the closing costs. Both loans will be fully amortizing. Required: a. If the loan is repaid after 20 years, which loan would be the better choice? b. If the loan is repaid after five years, which loan is the better choice?
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 14P
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Question
![A borrower is faced with choosing between two loans. Loan A is available for $76,000 at 6 percent
interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for the same
amount, but for 7 percent interest for 30 years, with 2 points to be included in the closing costs. Both
loans will be fully amortizing.
Required:
a. If the loan is repaid after 20 years, which loan would be the better choice?
b. If the loan is repaid after five years, which loan is the better choice?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc960c4cb-9442-4024-b25e-f71e408d63b1%2F864a73f6-4de9-45dc-84f9-8ddbd5237da6%2Fmzii43_processed.png&w=3840&q=75)
Transcribed Image Text:A borrower is faced with choosing between two loans. Loan A is available for $76,000 at 6 percent
interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for the same
amount, but for 7 percent interest for 30 years, with 2 points to be included in the closing costs. Both
loans will be fully amortizing.
Required:
a. If the loan is repaid after 20 years, which loan would be the better choice?
b. If the loan is repaid after five years, which loan is the better choice?
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