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(Loan options) Option 1: First Mortgage loan for $380,000 with an effective interest cost of 9%….

by | Sep 9, 2023 | finance

(Loan options) Option 1: First Mortgage loan for $380,000 with an effective interest cost of 9%. Option 2: First Mortgage loan for $350,000 with terms: 6%, 30 years & Second Mortgage loan for $30,000 with terms: 12% 10 years. The holding period is 6 years (note: The procedure varies slightly with the holding period selection). Mathematically demonstrate using PV analysis which option should be selected. Indicate whether option 1 or 2 should be taken. Show the table with labels when answering this question.

A. Calculate Monthly Payments and Loan Balances for Option 2. Show MPVIFA numbers: solve MP1, LB1, MP2, LB2 show all work

B. Do Present Value Analysis: Should the PV formula with dollar amounts and MPVIF(A) factors.

 C. Decision: Which Option should be selected and reason for the selection using marginal analysis

  

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