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

Current Loan:

o $2,000,000

o 7%

o 30 yr (amortization)

o Issued 10 yrs ago (20 yrs left)

New Loan:

o 5.5%

o 30 yr (amortization)

o $2000 in closing costs

o 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!

22) Vos are trying to decide- whether or not to refinasce given the following iaformation: - Curret loan: 52,000,000 Tes 30 yr (amertitation) lssued 10 yrs age (20 yru left) - Vew toan: sin76 30 y (amertization) 52000 in closing costo 1 point - If you do net refinasce, fhen yoa neald invest the focs in the steck market ai 9% annizal retum. - Yoe have a 25\% income tax mate. Sheuld yoe refinunce? Eaplain why or why net. show cach step and. all calculations to receive full eredit