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Consider a 30-year, $150,000 mortgage with a rate of 7 percent. Five years into the mortgage, rates have fallen to 5.7 percent. Suppose the transaction
Consider a 30-year, $150,000 mortgage with a rate of 7 percent. Five years into the mortgage, rates have fallen to 5.7 percent. Suppose the transaction cost of obtaining a new mortgage is $1,600. a. Should the homeowner refinance at the lower rate? b. Quantify the effect of the homeowner's decision. (Monthly Savings)
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