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For 26-30) A borrower is faced with choosing between two mortgages: Loan B 80,000 25 yr 10.5% 2 pt 496 Loan A Loan amount Term Interest rate Discount points Prepayment penalty 80,000 25 yr 10% 5 pt 0%

Assuming monthly payments, if the loans are a. Loan A b. Loan B c. Both loan are same d. Can not determined with the info given to matarity, which loan is better? ifthe loan is repaid after 3 years, which loan is better? a. Loan A b. Loan B c. Both loan are same d. Can not determined with the info given. 27, 28. If Loan B is the only choice, how many points should the lender charge if the lender desires a 11059 b. 4 d. 6 29. ILoan A is chosen, and after making payment for t0 years, the borrower decides to double his monthly payment t pay off the loan early. How many of these double-payments will it take to pay off the loun? a. 76 b. 65 c. 59 d. 48 30. If at the end of year 3 the market interest rate is 10.25%, and the lender decide to sell the loan, which loan s likely to sold at a price higher than its outstanding loan balance (that is, to be sold at a premium)? a. b. c. d. Loan A Loan B Both loans have the same value Not enough information to determine.

May I please have help with these? also how would I put this in the calculator?

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Answer #1

26. Loan A is the better one than loan B, because the term, borrowed amount is same but the interest rate is higher in B and there is no chance for prepayment penalty in A.

Option A is right

27. with 10% for 3 years, the interest amount becomes $12,929. 32, if the interest rate is 10.5% for 3 years, then the interest amount becomes as $13, 607.5. hence loan A is better.

Option A is right

28. option D is right

29. option A is right

30. Option A is the answer

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