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You are considering buying a house for $200,000. You have $40,000 in your bank account which pays 1% APR compounded monthly. If you contribute 10% of the price of the house as a down payment, the terms of your mortgage will be an original balance of $180,000 to be repaid over 30 years with equal monthly payments calculated based on an APR of 5% compounded monthly. Call this loan 1. If you contribute 20% of the price of the house as a down payment, the terms of your mortgage will be an original balance of $160,000 to be repaid over 30 years with equal monthly payments calculated based on an APR of 4% compounded monthly. Call this loan 2.

Which loan option should you take ________ (enter loan 1 or loan 2)

How much better is it in present value terms _________? Enter the dollar amount with no commas or dollar sign, for example 45784

Financial Management, Finance

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