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: e Current Loan: $2,000,000 o 7% o 30 yr (amortization) o 10 yr (balloon) o Issued 4 yrs ago (6 yrs left) o Prepayment penaltv of 1.5 points o?LB 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 penaltv of 1.5 points o OLB with prepay penalty $1,910,871 1 discount point = $19,109 PV of current (7%) loan @ 5.74% disc rate-$1.98 1.649 PV of current (7%) loan @ 9.19% disc rate-$1,723,915 . 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 RECEIVE FULL CREDIT! 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: e Current Loan: $2,000,000 o 7% o 30 yr (amortization) o 10 yr (balloon) o Issued 4 yrs ago (6 yrs left) o Prepayment penaltv of 1.5 points o?LB 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 penaltv of 1.5 points o OLB with prepay penalty $1,910,871 1 discount point = $19,109 PV of current (7%) loan @ 5.74% disc rate-$1.98 1.649 PV of current (7%) loan @ 9.19% disc rate-$1,723,915 . 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 RECEIVE FULL CREDIT