Question
2. It is now 5 years later and you decided to take out a fixed rate loan instead of the ARM. You now have option
2. It is now 5 years later and you decided to take out a fixed rate loan instead of the ARM. You now have option to refinance your current loan which has the following parameters:
| Original Loan (Current Loan) | $ 200,000.00 |
| Int Rate (Current Loan) | 4% |
| Term in Years (Current Loan) | 360 |
| Points (Current Loan) | 0.5% |
| Closing Costs (Current Loan) | $ 2,000.00 |
| Loan Balance (Current Loan) | $ 187,674.64 |
| Years Left on Loan (Current Loan) | 5 |
You have the opportunity to refinance into a lower interest rate with the following terms:
| OLB (New Loan) | $ 187,674.64 |
| Int Rate (New Loan) | 2.5% |
| Term in Years (New Loan) | 25 |
| Points (New Loan) | 1.5% |
| Closing Costs (New Loan) | $ 2,000.00 |
You have the following personal investment parameters:
| Opportunity Cost of Capital: | |
| Time You Will Remain in New Loan (Months) | 8 |
| Income Tax Rate: | 20% |
| Discount Rate: | 4% |
Should you refinance? Show all work/calculations in Excel file to receive full credit.
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Finance For Food Towards New Agricultural And Rural Finance
Authors: Doris Köhn
1st Edition
3662568659, 978-3662568651
