You are trying to decide whether or not to refinance given the following information:

Current Loan:

$2,000,000

7%

30 yr (amortization)

Issued 10 yrs ago (20 yrs left)

New Loan:

5.5%

30 yr (amortization)

$2000 in closing costs

1 point

If you do not refinance, then you would invest the fees in the stock market @ 9% annual return.

You have a 25% income tax rate.

Should you refinance? Explain why or why not. Show each step and all calculations to receive full credit!