Question

. When purchasing a $210,000 house, a borrower is comparing two loan alternatives. The first loan is a 90% loan at 10.5% for 25 years. The second loan is an 85% loan for 9.75% over 15 years. Both have monthly payments and the property is expected to be held over the life of the loan. What is the incremental cost of borrowing the extra money?

(A) 20.25% (B) 16.17% (C) 11.36% (D) 12.42%

Answer 1