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When you purchased your home, you took out a fully amortizing mortgage for $250,000 with a 6.5% rate for a 30-year term. After 10 years,
When you purchased your home, you took out a fully amortizing mortgage for $250,000 with a 6.5% rate for a 30-year term. After 10 years, you have a chance to refinance for the remaining 20 years with a rate of 4.5%, fully amortizing over the remaining 20 years; however, you have to pay $4,500 up front for the new loan. Based on the fee and how much you will be saving per month, what is the effective annualized return (RATE calc in Excel) on the $4,500 fee paid?
a. 5.3%
b. 46.7%
c. 63.8%
d. (4.5%) negative return given monthly payment increased
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