What Would Be the Real Cost of Borrowing in the Following

question 56

Multiple Choice

What would be the real cost of borrowing in the following case? A home equity loan is advertised at three percent compounded monthly,however,there is a legal fee of $400 and appraisal fee of $450 to set up the house as collateral.If Sarah needs to borrow $20 000 for one year,at which time will be able to repay the full amount,what is the effective rate of borrowing the $20 000 for the year?

• A)3)04%
• B)7)29%
• C)7)25%
• D)4)25%

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Definitions:

Key Ingredient

An essential component or factor necessary for achieving a specific result or effect.

Paranoid Personality Disorder

A mental health condition characterized by persistent mistrust and suspicion of others without sufficient basis.

Paranoid Schizophrenia

A subtype of schizophrenia characterized by intense delusions or auditory hallucinations relating to themes of persecution or grandiosity.

Delusional

A false belief held with strong conviction despite superior evidence to the contrary, often indicative of a psychological disorder.