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What is effective borrowing cost if the loan will be prepaid

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Problem 1: You bought a house with price of $500,000. Your LTV (loan-to-value ratio) is 80%. You choose the 30-year mortgage with interest rate 5%. Assuming the total transaction cost is $5,000. What is the effective borrowing cost if the loan will be prepaid at the end of 6 years?

Select one:

a. 5.12%
b. 5%
c. 11.77%
d. 5.25%

Reference no: EM132802626

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