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Assume the inflation rate is 3 . 0 8 % APR, compounded annually. Would you rather earn a nominal return of 5 . 5 5
Assume the inflation rate is APR, compounded annually. Would you rather earn a nominal return of APR,
compounded semiannually, or a real return of APR, compounded quarterly? Note: Be careful not to round any
intermediate steps less than six decimal places.The mortgage on your house is years old. It required monthly payments of had an original term of years,
and had an interest rate of APR In the intervening years, interest rates have fallen and so you have decided to
refinancethat is you will roll over the outstanding balance into a new mortgage. The new mortgage has a year
term, requires monthly payments, and has an interest rate of APR
a What monthly repayments will be required with the new loan?
b If you still want to pay off the mortgage in years, what monthly payment should you make after you refinance?
c Suppose you are willing to continue making monthly payments of $ How long will it take you to pay off the
mortgage after refinancing?
d Suppose you are willing to continue making monthly payments of $ and want to pay off the mortgage in
years. How much additional cash can you borrow today as part of the refinancing?
Note: Be careful not to round any intermediate steps less than six decimal places.
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