PLEASE HELP ME SOLVE THIS USING A FINANCIAL CALCULATOR / EXCEL FUNCTIONS PLEASE

Question

PLEASE HELP ME SOLVE THIS USING A FINANCIAL CALCULATOR / EXCEL FUNCTIONS

PLEASE HELP ME SOLVE THIS USING A FINANCIAL CALCULATOR / EXCEL FUNCTIONS

A borrower is faced with choosing between two loans. Loan A is available for S1,875,000 at 10 percent interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for the same amount, but for 11 percent interest for 30 years, with 2 points to be included in the closing costs. a. If the loan is repaid after 15 years, which loan would be the better choice? b. If the loan is repaid after five years, which loan is the better choice?

Explanation / Answer

(A)amount=1875000

Term=30years

Interest=10%, point=6

Amount to be paid when loan A is repaid in 15 years

1875000(1.1)^15+{1875000×0.06}=7944840.318

Loan B

1875000(1.11)^15+{1875000×0.02}= 9008605

So loan A is better as the payment is less than the loan B

(B) loanA

Repayment of loan in 5 years time

1875000(1.1)^5+{1875000×0.06)=3132206.25

Loan B repayment in 5 years time

1875000(1.11)^5+{1875000×0.02}=3196984

Loan A is better choice

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