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1.Ann is looking for a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for $4,500,000 Mortgage A has a 4.38% interest rate and requires Ann to pay 1.5 points upfront. Mortgage B has a 6% interest rate and requires Ann to pay zero fees upfront. Assuming Ann makes payments for 2 years before she sells the house and pays the bank the balance, which mortgage has the lowest cost of borrowing (ie lowest annualized IRR)? Type 1 for A, type 2 for B. ith monthnumente.
2. Ann obtains a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for $4,500,000 at 4.38%. How much does Ann need to pay monthly?
Expert Solution
1.mortgage b has the lowest cost of borrowing if 1.5 point is paid upfront in the
mortgage a . mortgage b is clearly less costly then mortagage b because it has no upfront fees and even though it has 6 percent rate.
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