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Consider a 30-year, $160,000 mortgage with a rate of 6.9 percent. Eight years into the mortgage, rates have fallen to 5.6 percent. Suppose the transaction

Consider a 30-year, $160,000 mortgage with a rate of 6.9 percent. Eight years into the mortgage, rates have fallen to 5.6 percent. Suppose the transaction cost of obtaining a new mortgage is $1,700.

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.)

Monthly Savings:

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