Question
Consider a 20-year, $180,000 mortgage with a rate of 6.3 percent. Four years into the mortgage, rates have fallen to 5 percent. Suppose the transaction
Consider a 20-year, $180,000 mortgage with a rate of 6.3 percent. Four years into the mortgage, rates have fallen to 5 percent. Suppose the transaction cost of obtaining a new mortgage is $1,900.
a.Should the homeowner refinance at the lower rate?
- Yes
- No
b.Quantify the effect of the homeowner's decision.(Do not round intermediate calculations. Round your answer to 2 decimal places.)
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Contemporary Financial Management
Authors: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao
13th edition
1285198840, 978-1285198842
