Assume a property can be purchased for $105,000. The existingmortgage has a balance of only $50,000, 15 years remaining andpayments are $507.13. You want to assume the mortgage, but need tofinance $70,000 total so you must take out a second mortgage for$20,000 for 15 years at 14%. Alternatively you could purchase anequivalent property for $100,000 by obtaining a loan for $70,000for 15 years at the market rate of 11%.
a.       What is theeffective return (or cost) of assuming the loan and taking out a2ndmortgage?
b.       Is it better toassume the loan and take out a second mortgage, or should you buythe alternative property and finance the purchase with a new loanat the market rate (answer should be \"assume\" or \"new\"?
