Question
Ann got a 30 year FRM with annual payments equal to $12,000 per year. After 2 years of payments Ann will refinance the balance into
"Ann got a 30 year FRM with annual payments equal to $12,000 per year. After 2 years of payments Ann will refinance the balance into a 28 year FRM with annual payments equal to $10,000 per year. Refinancing will cost Ann $2,500. Ann will prepay the new loan 3 years after refinancing. She will save $4,000 on her loan balance when she prepays. Using all the information given, write the NPV formula for Ann s refinancing decision if her annual discount rate is i. Plug in all the numbers you can. Only plug-in one final net cash-flow for each time period. Feel free to omit periods when the net cash-flow is zero. Sample Answer: NPV(i)= -100 + (5)/(1+i)^1 + 105/(1+i)^2"
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