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A few years back, Dave and Jana bought a new home. They borrowed $230,415 at an annual fixed rate of 5,49% (15-year term) with monthly

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A few years back, Dave and Jana bought a new home. They borrowed $230,415 at an annual fixed rate of 5,49% (15-year term) with monthly payments of $1,881.46. They fust made their 65 th payment, and the current bolance on the foan is $208,555.87. Interest rates are at an all-time low, and Dave and Jana are thinking of refinaneing to a new 15 -year fixed loan. Their bank has made the following offer: 15 year term, 3.0%, plus out-of-pocket costs of $2,937. The out-of-pocket costs must be paid in full at the time of refinancing. Build a spreadsheet model to evaluate this offer. The Excel function: = PMT(rate, nper, pv,N, type) calculates the payment for a loan based on constant psyments and a constant interest rate. The arguments of this function are: rate = the interest rate for the loan nper * the total number of payments v= present value (the amount borrowed) = future value the desired cash balance after the last payment (usually 0 )] type = payment type (0 - end of period, 1= beginning of the period) For example, for Dave and Jana's original loan, there will be 180 payments (1215=180), so we would use =pMT(0.0549/12,180,230415,0,0)=$1,881.46. Note that because payments are made monthly, the annual interest rate must be expressed as a monthly rate, Also, for payment caloulations, we assume that the poyment is made at the end of the month. The savings from refinancing occur over time, and therefore need to be dascounted back to current dollars. The focmula for converting K doliars saved t months from now to current dollars is: (1+r)t1K where r is the monthly inflation rate. Assume that r=0.002 and that Oave and Jana make their payment at the cond of cach month. Use vour model to calculate the savings in current dollars associated with the refinanced loan versus stayng with the original loan: If required, round your answer to the nearest whole doliar amount, If your answer is negative use fminus sign

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