Ten years ago you borrowed $300,000 to finance the purchase of a $350,000 house. The interest rate on the old mortgage is 7%. Payment terms are being made monthly to amortize the loan over 30 years. You have found another lender who will refinance the current outstanding loan balance at 4.5% with monthly payments for 20 years. The new lender will charge one discount point on the loan. Other refinancing costs will equal $8,000. There are no prepayment penalties associated with either loan. You feel the appropriate opportunity cost to apply to this refinancing decision is 4.5%. What should be the monthly payment on the new loan (answers rounded to hundreds)? Excel O a) $1,300 O b) $1,600 O c) $1,900 O d) $2,000 O e) $2,200
Ten years ago you borrowed $300,000 to finance the purchase of a $350,000 house. The interest rate on the old mortgage is 7%. Payment terms are being made monthly to amortize the loan over 30 years. You have found another lender who will refinance the current outstanding loan balance at 4.5% with monthly payments for 20 years. The new lender will charge one discount point on the loan. Other refinancing costs will equal $8,000. There are no prepayment penalties associated with either loan. You feel the appropriate opportunity cost to apply to this refinancing decision is 4.5%. What should be the monthly payment on the new loan (answers rounded to hundreds)? Excel O a) $1,300 O b) $1,600 O c) $1,900 O d) $2,000 O e) $2,200
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:Ten years ago you borrowed $300,000 to finance the purchase of a $350,000 house.
The interest rate on the old mortgage is 7%. Payment terms are being made monthly
to amortize the loan over 30 years. You have found another lender who will refinance
the current outstanding loan balance at 4.5% with monthly payments for 20 years.
The new lender will charge one discount point on the loan. Other refinancing costs
will equal $8,000. There are no prepayment penalties associated with either loan.
You feel the appropriate opportunity cost to apply to this refinancing decision is
4.5%.
What should be the monthly payment on the new loan (answers rounded to
hundreds)?
Excel
O a) $1,300
b) $1,600
O c) $1,900
d) $2,000
e) $2,200
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