You have been living in the house you bought 7 years ago for $300,000. At that tin you took out a loan for 80% of the house at a fixed rate 15-year loan at an annual stated rate of 8.0%. You have just paid off the 84th monthly payment. Interest rates have meanwhile dropped steadily to 6.0% per year, and you think it is finally time t refinance the remaining balance over the residual loan life. But there is a catch. The to refinance your loan is $5,000. Should you refinance the remaining balance? How much would you save/lose if you decided to refinance? a. Yes, gain $7,287.20 b. No, lose $12,287.20 c. Yes, gain $12,287.20 d. No, lose $7,287.20
You have been living in the house you bought 7 years ago for $300,000. At that tin you took out a loan for 80% of the house at a fixed rate 15-year loan at an annual stated rate of 8.0%. You have just paid off the 84th monthly payment. Interest rates have meanwhile dropped steadily to 6.0% per year, and you think it is finally time t refinance the remaining balance over the residual loan life. But there is a catch. The to refinance your loan is $5,000. Should you refinance the remaining balance? How much would you save/lose if you decided to refinance? a. Yes, gain $7,287.20 b. No, lose $12,287.20 c. Yes, gain $12,287.20 d. No, lose $7,287.20
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
Related questions
Question
Transcribed Image Text:You have been living in the house you bought 7 years ago for $300,000. At that time,
you took out a loan for 80% of the house at a fixed rate 15-year loan at an annual
stated rate of 8.0%. You have just paid off the 84th monthly payment. Interest rates
have meanwhile dropped steadily to 6.0% per year, and you think it is finally time to
refinance the remaining balance over the residual loan life. But there is a catch. The fee
to refinance your loan is $5,000. Should you refinance the remaining balance? How
much would you save/lose if you decided to refinance?
a. Yes, gain $7,287.20
b. No, lose $12,287.20
c. Yes, gain $12,287.20
d. No, lose $7,287.20
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education