Assume that a borrower has a choice between two comparable fixed-rate mortgage loans with the same interest rate, but different mortgage terms, one being a 30-year mortgage and the other a 15-year mortgage. Under financially unconstrained circumstances, which of the following statements best describes the borrowers preference?
Correct Answer:
(C) The borrower would be indifferent between the two mortgages.
Explanation:
The borrower would be indifferent between the two mortgages.

Question

Assume that a borrower has a choice between two comparable fixed-rate mortgage loans with the same interest rate, but different mortgage terms, one being a 30-year mortgage and the other a 15-year mortgage. Under financially unconstrained circumstances, which of the following statements best describes the borrowers preference?

Correct Answer:

(C) The borrower would be indifferent between the two mortgages.

Explanation:

The borrower would be indifferent between the two mortgages.

ObjectiveMcq · Accepted Answer

The borrower would be indifferent between the two mortgages.

ObjectiveMcq · Answer

The borrower would prefer the 30-year mortgage.

ObjectiveMcq · Answer

The borrower would prefer the 15-year mortgage.

ObjectiveMcq · Answer

The borrower is unable to compare mortgage loans of two different maturities.