Bud Is Offering a House for Sale for $180,000 with an Assumable

Multiple Choice

Bud is offering a house for sale for $180,000 with an assumable loan which was made 5 years ago for $140,000 at 8.75% over 30 years.Kelsey is interested in buying the property and can make a $20,000 down payment.A second mortgage can be obtained for the balance at 12.5% for 25 years.What is the effective cost of the combined loans,if Kelsey would like to compare this financing alternative to obtaining a first mortgage for the full amount?

A) 10.63%
B) 9.39%
C) 9.04%
D) 11.27%