A Borrower Is Purchasing a Property for $180,000 and Can

question 32

Multiple Choice

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%

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Definitions:

Income Tax Expense

Income tax expense represents the amount of money a company expects to pay in taxes based on its taxable income for the current fiscal year.

Comparative Balance Sheets

Financial statements that present the financial position of a company at different points in time, side by side, for comparison.

Net Income

The total profit remaining after all expenses, taxes, and costs have been subtracted from total revenue, indicating the financial performance of a company over a specified period.

Cash Flows

This term describes the total amount of money being transferred into and out of a business, particularly in terms of liquid assets.