Question
Problem 21-13 Prepayments (LO3, CFA1) Consider a 30-year, $155,000 mortgage with a rate of 6.95 percent. Nine years into the mortgage, rates have fallen to
Problem 21-13 Prepayments (LO3, CFA1)
Consider a 30-year, $155,000 mortgage with a rate of 6.95 percent. Nine years into the mortgage, rates have fallen to 5.65 percent. Suppose the transaction cost of obtaining a new mortgage is $1,650.
a. Should the homeowner refinance at the lower rate?
multiple choice
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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Essentials Of Financial Management Text And Cases
Authors: George C Philippatos
1st Edition
0816267162, 978-0816267163
