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JABoa posted;

"The choice is not clear to me, but think of it this way. With the 10 year option, the difference of $113 a month represents a 10.3% return on that $13,187."

Your return assumption is $113 x 12 = $1,356/year
with an investment of $13,187. This would be correct if at the end of 10 years, his mother could cash out the $13,187. I don't believe this is the case.

The rate is much lower because the additional $113 per month is being paid partially through return and partially with principle so that there would be no principle at the end of 10 years and this would calcualte out to be a return of 4.6% per year.


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