A house price of $100,000 can be financed with two loans below with monthly payments. The total origination cost associated with these two loans is $2,000. 1st loan 2nd loan $ Loan Amount 80,000 10,000 Term (years) 30 30 Interest Rate 5% 7%
A house price of $100,000 can be financed with two loans below with monthly payments. The total origination cost associated with these two loans is $2,000. 1st loan 2nd loan $ Loan Amount 80,000 10,000 Term (years) 30 30 Interest Rate 5% 7%
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter7: Using Consumer Loans
Section: Chapter Questions
Problem 9FPE: Calculating and comparing add-on and simple interest loans. Eli Nelson is borrowing 10,000 for five...
Related questions
Question
![A house price of $100,000 can be financed with two
loans below with monthly payments. The total
origination cost associated with these two loans is
$2,000.
1st loan
OO
2nd loan
4.28%
5.28%
6.28%
$
7.28%
$
Loan
Amount
80,000
Term (years)
30
10,000
Alternatively, the borrower can borrow one loan in the
amount of $90,000 with origination cost of $1,500.
What should the interest rate be on the $90,000, 30
years loan with monthly payments so that the
borrower will be indifferent between these two
alternatives?
30
Interest
Rate
5%
7%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8bfc4c8e-a27b-4420-8aeb-ba4f447c96c1%2F75fd8926-472d-4669-90b6-714cad1494c4%2Fwklnp1g_processed.png&w=3840&q=75)
Transcribed Image Text:A house price of $100,000 can be financed with two
loans below with monthly payments. The total
origination cost associated with these two loans is
$2,000.
1st loan
OO
2nd loan
4.28%
5.28%
6.28%
$
7.28%
$
Loan
Amount
80,000
Term (years)
30
10,000
Alternatively, the borrower can borrow one loan in the
amount of $90,000 with origination cost of $1,500.
What should the interest rate be on the $90,000, 30
years loan with monthly payments so that the
borrower will be indifferent between these two
alternatives?
30
Interest
Rate
5%
7%
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![Pfin (with Mindtap, 1 Term Printed Access Card) (…](https://www.bartleby.com/isbn_cover_images/9780357033609/9780357033609_smallCoverImage.jpg)
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Pfin (with Mindtap, 1 Term Printed Access Card) (…](https://www.bartleby.com/isbn_cover_images/9780357033609/9780357033609_smallCoverImage.jpg)
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT