Suppose that you have two loan choices with monthly payments Choice Loan Amount Term (years) Interest Rate 1 $ 250,000 30 5% 2 $ 220,000 30 4.50% (a) What is the incremental borrowing cost of $30,000 for loan 1 over loan 2 if you hold the loan for the entire term and there are no origination costs for the two loans? Incremental Borrowing Cost: $3,254.72 (b) What is the incremental borrowing cost of $30,000 for loan 1 over loan 2 if you hold the loan for only 6 years (72 months) and there are no origination costs for the two loans? Incremental Borrowing Cost: $650.94
Suppose that you have two loan choices with monthly payments Choice Loan Amount Term (years) Interest Rate 1 $ 250,000 30 5% 2 $ 220,000 30 4.50% (a) What is the incremental borrowing cost of $30,000 for loan 1 over loan 2 if you hold the loan for the entire term and there are no origination costs for the two loans? Incremental Borrowing Cost: $3,254.72 (b) What is the incremental borrowing cost of $30,000 for loan 1 over loan 2 if you hold the loan for only 6 years (72 months) and there are no origination costs for the two loans? Incremental Borrowing Cost: $650.94
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 14P
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