After-tax cost of debt??Personal Finance Problem??Bella Wans isinterested in buying a new motorcycle. She has decided to borrowthe money to pay the

?$30,000

purchase price of the bike. She is in the

33?%

income tax bracket. She can either borrow the money at aninterest rate of

7?%

from the motorcycle? dealer, or she could take out a secondmortgage on her home. That mortgage would come with an interestrate of

9?%.

Interest payments on the mortgage would be tax deductible for?Bella, but interest payments on the loan from the motorcycle dealercould not be deducted on? Bella's federal tax return.

a.??Calculate the ?after-tax cost of borrowing from themotorcycle dealership.

b. Calculate the ?after-tax cost of borrowing through a secondmortgage on? Bella's home.

c.??Which source of borrowing is less costly for? Bella?

d.??Should Bella consider any other factors when deciding whichloan to take? out?

a. The? after-tax cost of borrowing from the motorcycledealership is

____ ?%.

?(Round to the nearest whole? percentage.)b. The? after-tax costof borrowing through a second mortgage is

____ ?%.

? (Round to two decimal? places.)

c.??Which source of borrowing is less costly for?Bella????(Select the best answer? below.)

A.

Bella should borrow by taking the

second mortgagesecond mortgage.

B.

Both loans have the same rate of

33?%,

so Bella should choose the loan she likes best.

C.

Bella should borrow by taking the

dealership loandealership loan.

D.

Both loans have the same rate of

33?%,

so Bella should not take either loan.

d.??Is there any other consideration that Bella ought to thinkabout when deciding which loan to take out to pay for the?motorcycle????(Select the best answer? below.)

A.

Using the motorcycle dealership loan does put Bella at risk oflosing her home and motorcycle if she is unable to make the loanpayments.

B.

Using the second home mortgage does put Bella at risk of losingher motorcycle if she is unable to make the mortgage payments.

C.

Using the second home mortgage does put Bella at risk of losingher home if she is unable to make the mortgage payments.

D.

Using the motorcycle dealership loan does put Bella at risk oflosing her home if she is unable to make the loan payments.