1. What is the net benefit (loss) of the borrower’s decision to refinance today given the following information and that she intends to move in 5 years?
Current loan closing costs: 2 points New loan type: 15-year fixed rate
Current loan original balance: $350,000 New loan interest: 5.00%
Current loan balance: $263,993.63 New loan total fees: 2.5 points
Current loan interest rate: 7.5% Individual discount rate: 6%
Current loan payment: $2,447.25 Income Tax Rate: 10%
a. $11,461.06
b. $13,321.16
c. $18,601.03
d. $23,495.89
None of the above
2. How long will it take you to breakeven assuming you take the refinance in question 1 using the same discount rate?
a. 28 months
b. 29 months
c. 30 months
d. 31 months
None of the above