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Javier and Anita Sanchez purchased a home on January 1, 2017 for, $500,000 by paying...

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Accounting

Javier and Anita Sanchez purchased a home on January 1, 2017 for, $500,000 by paying $200,000 down and borrowing the remaining $300,000 with a 6 percent loan secured by the home. The loan requires interest-only payments for the first five years. The Sanchezes would itemize deductions even if they did not have any deductible interest. The Sanchezes marginal tax rate is 25 percent.

What is the after-tax cost of the interest expense to the Sanchezes in 2017?

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