A borrower is faced with choosing between two loans. Loan A is available fof $75,000 at6 percent interest for 30 years, with 6 points to be included in closing Costs. Loan B would bemade for the same amount, but for 7 percent interest for 30 years, with 2 points to be included inthe closing costs. Both loans will be fully amortizing. a. If the loan is repaid after 20 years, which loan is the better choice?
b. If the loan is repaid after 5 years, which loan is the better choice?
c. Suppose the lender includes a prepayment penalty of 4 percent in the mortgage loan. If the loan is repaid after 5 years, which loan is the better choice
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A borrower is faced with choosing between two loans. Loan A is available fof $75,000 at6 percent int...
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