Question $2$

Joel and Billie purchased their home in $2007$ and took out a mortgage of $$1,000,000.$ The

current loan balance is $$875,000$ and the fair market value of the home is $$1,400,000.$ The

rate on their existing loan is $6\%$ and the current rate for home loans is $4\mathrm{.}5\%.$ Joel and Billie

would like to refinance to take advantage of the lower interest rate. If they refinance the

full $$875,000$ balance on their mortgage on January $1^{st}$ of this year, what amount of

interest is deductible as an itemized deduction this year?

$$33,750.$

$$39,375.$

$$34,453.$

$$0.$