An investor has $60,000 to invest in a $280,000 property. He can obtain either (option A) a $220,000 loan at 9.5 percent for 20 years; or (option B) a $180,000 loan at 8.75 percent for 20 years and a second mortgage for $40,000 at 13 percent for 20 years. All loans require monthly payments and are fully amortizing. How much more would be the effective cost % if you went forward with option A instead of option B. I.e.. what is "cost% for A - cost % for B"? (Notes: if the cost is less for option A, don't forget the negative sign. Input answer without "%" sign, e.g., 5.75% as 5.75.) Answer: Refer to the same question. Which option is better for the investor? Select one: O a. Option A O O O b. Option B c. Neither d. Either is the same e. It depends on borrower Refer to the same question. How much more would be the effective cost % if you went forward with option A instead of option B if the second mortgage in option B had a 10-year term instead? (Notes: if the cost is less for option A don't forget the negative sign. Input answer without "%" sign, e.g.. 5.75% as 5.75.) Answer:
An investor has $60,000 to invest in a $280,000 property. He can obtain either (option A) a $220,000 loan at 9.5 percent for 20 years; or (option B) a $180,000 loan at 8.75 percent for 20 years and a second mortgage for $40,000 at 13 percent for 20 years. All loans require monthly payments and are fully amortizing. How much more would be the effective cost % if you went forward with option A instead of option B. I.e.. what is "cost% for A - cost % for B"? (Notes: if the cost is less for option A, don't forget the negative sign. Input answer without "%" sign, e.g., 5.75% as 5.75.) Answer: Refer to the same question. Which option is better for the investor? Select one: O a. Option A O O O b. Option B c. Neither d. Either is the same e. It depends on borrower Refer to the same question. How much more would be the effective cost % if you went forward with option A instead of option B if the second mortgage in option B had a 10-year term instead? (Notes: if the cost is less for option A don't forget the negative sign. Input answer without "%" sign, e.g.. 5.75% as 5.75.) Answer:
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:An investor has $60,000 to invest in a $280,000 property. He can obtain either (option A) a $220,000 loan at 9.5 percent for 20 years; or (option B) a $180,000 loan at 8.75 percent for 20
years and a second mortgage for $40,000 at 13 percent for 20 years. All loans require monthly payments and are fully amortizing. How much more would be the effective cost % if you
went forward with option A instead of option B. I.e., what is "cost% for A - cost % for B"? (Notes: if the cost is less for option A, don't forget the negative sign. Input answer without "%"
sign, e.g., 5.75% as 5.75.)
Answer:
Refer to the same question. Which option is better for the investor?
Select one:
O a. Option A
O
b. Option B
O
c. Neither
d. Either is the same
e. It depends on borrower
O
Refer to the same question. How much more would be the effective cost % if you went forward with option A instead of option B if the second mortgage in option B had a 10-year
term instead? (Notes: if the cost is less for option A, don't forget the negative sign. Input answer without "%" sign, e.g.. 5.75% as 5.75.)
Answer:
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