What is the incremental borrowing cost

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A house is for sale for $200,000. You have a choice of two 20-year mortgage loans with monthly payments: (1) if you make a down payment of $50,000, you can obtain a loan with a 7% rate of interest or (2) if you make a down payment of $100,000, you can obtain a loan with a 5% rate of interest. What is the effective annual rate of interest (in percent) on the additional $50,000 borrowed on the first loan (i.e. what is the incremental borrowing cost)?

Reference no: EM131554443

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