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A borrower can obtain an 80% loan with an 8% interest rate and monthly payments....

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Finance

A borrower can obtain an 80% loan with an 8% interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90% loan at an 8.5% rate with the same loan term. The borrower plans to own the property for the entire loan term. a) What is the incremental cost of borrowing the additional funds? b) How would your answer change if 2 points were charged on the 90% loan? c) Would your answer to part (b) change if the borrower planned to own the property for only 5 years? solve with financial calculator

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