On the following loan, what is the best estimate of the effective borrowing cost if the loan is prepaid in six years?
Loan amount: | $100,000 |
Interest rate: | 7 percent |
Term: | 180 months |
Up-front costs: | 7 percent of the loan amount |
a. 8.2 percent.
b. 8.4 percent.
c. 8.5 percent.
d. 8.7 percent.
e. 9.0 percent.
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