A House Is for Sale for $250,000

question 8

Multiple Choice

A house is for sale for $250,000. You have a choice of two 20-year mortgage loans with monthly payments: 1) if you make a down payment of $25,000, you can obtain a loan with a 6% rate of interest or 2) if you make a down payment of $50,000, you can obtain a loan with a 5% rate of interest. What is the effective annual rate of interest on the additional $25,000 borrowed on the first loan?

• A) 1.00%
• B) 6.00%
• C) 12.95%
• D) 18.67%
• E) 20.10%

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Definitions:

Macroeconomic Factor

A wide-scale economic condition or variable that influences a broad economy and consequently affects individual businesses and financial markets.

Evolution of Beta

The evolution of beta refers to changes in the beta coefficient of an asset or portfolio over time, indicating variations in its volatility in relation to the broader market.

Forecast

A prediction or estimate of future events, especially relating to weather or economic trends, based on analysis of available data.

Last Year

Refers to the immediately preceding calendar year or fiscal year in financial contexts.