A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%. A second loan can be obtained at 15% so the borrower would be better off by borrowing with the smaller loan and a second mortgage.

Question

Quizplus · Accepted Answer

The borrower would not be better off with the second loan at 15% because it is more expensive than the incremental cost of 14% for the extra $10,000.

A Borrower Finds That the Incremental Cost of Borrowing an Extra