Assume You Financed a New House with a 30-Year Fixed

question 25

Multiple Choice

Assume you financed a new house with a 30-year fixed rate mortgage at a 6% annual interest.rate.If you can deduct your mortgage interest payments from your taxable income and you are in the 30% tax bracket, what would be the real after-tax cost of borrowing if the average annual inflation rate is 4.2% over the 30-years period?

• A)+4.2%
• B)+1.8%
• C)+1.2%
• D)0%
• E)-1.2%

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