22) You are trying to decide whether or not to refinance now or wait a year by calculating the value of the option to prepay given the following information: Current Loan: o $2,000,000 o 7% o 30 yr (amortization) o 10 yr (balloon) o Issued 4 yrs ago 6 yrs left) o Prepayment penalty of 1.5 points O OLB with prepay penalty = $1,910,871 New Loan: o 5.5% (5.74% YTM) or 8.5% (9.19% YTM) with 50/50 probability o 30 yr (amortization) O 6 yrs left until balloon o Prepayment penalty of 1.5 points O OLB with prepay penalty = $1,910,871 o discount points and fees = $19,109 PV of current (7%) loan @ 5.74% disc rate = $1,981,649 PV of current (7%) loan @ 9.19% disc rate = $1,723,915 30% discount rate Refinance savings for current year = $12,000 A. Calculate the NPV and Net Benefit of prepayment option for the 5.5% scenario. YOU MUST SHOW ALL CALCULATIONS TO RECEIVE FULL CREDIT! B. Calculate the NPV and Net Benefit of prepayment option for the 8.5% scenario. YOU MUST SHOW ALL CALCULATIONS TO RECEIVE FULL CREDIT! C. Calculate the value of the option to prepay using the probability weighted scenarios. Should you refinance or wait a year and revisit the situation? YOU MUST SHOW ALL CALCULATIONS TO 22) You are trying to decide whether or not to refinance now or wait a year by calculating the value of the option to prepay given the following information: Current Loan: o $2,000,000 o 7% o 30 yr (amortization) o 10 yr (balloon) o Issued 4 yrs ago 6 yrs left) o Prepayment penalty of 1.5 points O OLB with prepay penalty = $1,910,871 New Loan: o 5.5% (5.74% YTM) or 8.5% (9.19% YTM) with 50/50 probability o 30 yr (amortization) O 6 yrs left until balloon o Prepayment penalty of 1.5 points O OLB with prepay penalty = $1,910,871 o discount points and fees = $19,109 PV of current (7%) loan @ 5.74% disc rate = $1,981,649 PV of current (7%) loan @ 9.19% disc rate = $1,723,915 30% discount rate Refinance savings for current year = $12,000 A. Calculate the NPV and Net Benefit of prepayment option for the 5.5% scenario. YOU MUST SHOW ALL CALCULATIONS TO RECEIVE FULL CREDIT! B. Calculate the NPV and Net Benefit of prepayment option for the 8.5% scenario. YOU MUST SHOW ALL CALCULATIONS TO RECEIVE FULL CREDIT! C. Calculate the value of the option to prepay using the probability weighted scenarios. Should you refinance or wait a year and revisit the situation? YOU MUST SHOW ALL CALCULATIONS TO