Suppose a homeowner has an existing mortgage loan with these terms: Remaining balance of $150,000, interest rate of 8 percent, and remaining term of 10 years (monthly payments). This loan can be replaced by a loan at an interest rate of 6 percent, at a cost of 8 percent of the outstanding loan amount. Required: a. What is the net benefit of refinancing? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places. b. What is the NPV if the homeowner expects to be in the home for only five more years? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places. a. Net benefit of refinancing b. NPV $4 6,552.77 1,819.91
Suppose a homeowner has an existing mortgage loan with these terms: Remaining balance of $150,000, interest rate of 8 percent, and remaining term of 10 years (monthly payments). This loan can be replaced by a loan at an interest rate of 6 percent, at a cost of 8 percent of the outstanding loan amount. Required: a. What is the net benefit of refinancing? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places. b. What is the NPV if the homeowner expects to be in the home for only five more years? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places. a. Net benefit of refinancing b. NPV $4 6,552.77 1,819.91
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Suppose a homeowner has an existing mortgage loan with these terms: Remaining balance of $150,000, interest rate of
8 percent, and remaining term of 10 years (monthly payments). This loan can be replaced by a loan at an interest rate of
6 percent, at a cost of 8 percent of the outstanding loan amount.
Required:
a. What is the net benefit of refinancing?
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and
round your answers to 2 decimal places.
b. What is the NPV if the homeowner expects to be in the home for only five more years?
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and
round your answers to 2 decimal places.
a. Net benefit of refinancing
b. NPV
$
+
6,552.77
1,819.91
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