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Solved Question: A home buyer intends to purchase a $300,000 home

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A home buyer intends to purchase a $300,000 home. The two financing options available to the buyer are: 1) he can obtain 80% loan at a 4.25% interest rate with monthly payments amortized over 30 years and total closing costs of 2.5% of the new loan.

What is the APR for option 1?

2) He can obtain 95% FHA loan at a rate of 6.75% with monthly payments amortized over 30 years and total closing costs of 5.5% of the new loan.

What is the APR for option 2?

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