Question 29 A borrower is borrowing $300,000 with a 30 year term, monthly payments, and has the following two interest rate options: (1) 5% interest rate without paying discount points; or (ii) 4.75% interest rate and paying 1 discount point. The borrower will pay $3,000 in loan costs on either loan in addition to any discount points. The borrower expects to move or refinance in 10 years. Which of the following is true?... a. The EBC for option () is 5.14% O b. The EBC for option () is 5.03% c. The borrower should choose option p d. a and b O e. a, b and c

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.