Question

A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest and 1 point and the second is a 95% loan for 25 years at 9.25% interest and 1 point. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money?
(A) 13.66%
(B) 13.50%
(C) 14.34%
(D) 12.01%

Answer

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