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Suppose that five years ago you borrowed $500,000 using a 30-year fixed-rate mortgage with an annual interest rate of 7.00% with monthly payments and compounding.
- Suppose that five years ago you borrowed $500,000 using a 30-year fixed-rate mortgage with an annual interest rate of 7.00% with monthly payments and compounding. The interest rate on 30-year fixed-rate mortgages has fallen to 6.25% and you are wondering whether you should refinance the loan. Refinancing costs are expected to be 4% of the new loan amount.
- What is the net present value of refinancing if you make all of the scheduled payments on the new loan?
- What is the net present value of refinancing if you pay off the new loan at the end of the 6th year?
- How many payments do you need to make on the new loan in order for refinancing to have a positive net present value?
PLEASE USE A CALCULATOR IF POSSIBLE. AND PLEASE WRITE OUT EASY TO FOLLOW STEPS. THANK YOU
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Financial Regulation In The Global Economy
Authors: Richard J. Herring , Robert E. Litan
1st Edition
0815791550, 9780815752837, 9780815791553
