Three college friends decided to buy a “fixer-upper” apartment building in Modesto, California after graduating from UC San Diego in 2020. They expected to achieve a significant appreciation on their investment after they remodeled and sold the property. At the time, they could finance the acquisition with either: (A) a 25-year fully amortizing fixed rate mortgage loan payable monthly from Bank of the West with a ten percent down payment and a 6.0% annual interest rate, or (B) a 25-year fully amortizing fixed rate mortgage loan payable monthly from Cathay Bank with a five percent down payment and a 6.25% annual interest rate. What is the effective annual interest rate on the additional amount borrowed if they took the loan from Cathay Bank? a. 12.59% b. 6.25% c. 9.99% d. 10.39%

Three college friends decided to buy a “fixer-upper” apartment building in Modesto, California after graduating from UC San Diego in 2020. They expected to achieve a significant appreciation on their investment after they remodeled and sold the property. At the time, they could finance the acquisition with either: (A) a 25-year fully amortizing fixed rate mortgage loan payable monthly from Bank of the West with a ten percent down payment and a 6.0% annual interest rate, or (B) a 25-year fully amortizing fixed rate mortgage loan payable monthly from Cathay Bank with a five percent down payment and a 6.25% annual interest rate. What is the effective annual interest rate on the additional amount borrowed if they took the loan from Cathay Bank? a. 12.59% b. 6.25% c. 9.99% d. 10.39%