You took a 30 year mortgage with monthly payments of $1200. The loan rate is 11% (APR) compounded monthly.

1)How much did you borrow from the bank?

2) You have 25 years left on the mortgage, what is your outstanding balance?

3) Interest rates have gone down to 6% (APR compounded monthly) and you wish to refinance. Assume you wish to continue payments for the next 25 years, what is the new monthly payment?

4) Bank imposes a penalty on closing loans early. What is the maximum penalty the bank can impose such that refinancing will be worthwhile?