What are the net benefits

Assignment Help Finance Basics
Reference no: EM133076543

Five years ago, a borrower had a mortgage of $80,000 at 10% for a time period of 30 years Currently, the market rate is 8% on 25-year mortgages. The existing mortgage has a prepayment penalty of 5% of the outstanding balance and the lender will charge a financing cost of 4% on the new loan.

If the borrower plans to hold either mortgage for the next 25 years (we suppose the term of the new loan is 25 years which is the number of years remaining on the old loan):

1) Without discounting, should he/she refinance, what are the net benefits?

2) With discounting, should he/he refinance, what are the net benefits?

Reference no: EM133076543

Questions Cloud

Case study-wuttke corp : Wuttke Corp. wants to raise $4.5 million via a rights offering. The company currently has 550,000 shares of common stock outstanding that sell for $80 per share
New algorithm in your organization website : Hashing algorithms have been around a long time. How would you deploy this new algorithm in your organization's website?
Case andrews corp : Andrews Corp. ended the year carrying $30,313,000 worth of inventory. Had they sold their entire inventory at their current prices, how many more dollars of con
What is covered interest rate parity : Briefly explain what is covered interest rate parity and the mechanism behind why it should hold. You do not need to write down a formula, instead aim to provid
What are the net benefits : Five years ago, a borrower had a mortgage of $80,000 at 10% for a time period of 30 years Currently, the market rate is 8% on 25-year mortgages.
Installing gui hash generator-public key infrastructure : Explore the world of Hashing. Complete the Hands-On Project 3-3 "Installing GUI Hash Generators and Comparing Digest" from the textbook.
Determining the fund manager risk position : -What position should the fund manager take if the beta of the fund manager's risk position is 1.5?
Effect of taking on a loan : Where she might obtain financing for a vehicle loan?4. The effect of taking on a loan on her overall financial planning?
Estimate of mc donald current stock price : Dividend payout ratio is expected to remain constant at 60%. If cost of equity is 6.5%, what is the best estimate of Mc Donald's current stock price?

Reviews

Write a Review

Finance Basics Questions & Answers

  Find the unlevered cost of capital for dell and hp

Find the unlevered cost of capital for Dell and HP. Assume that HP's debt-to-equity ratio will stay constant forever.

  Analysis of past monthly movements in ibm

Problem: Analysis of past monthly movements in IBM's stock price produces the following estimates

  What is the price of a share of stock if the firm does not

california real estate inc. expects to earn 110 million per year in perpetuity if it does not undertake any new

  Calculate npv and irr for project-south tel communications

Assume that South Tel has sufficient taxable income from other projects so that it can expense the cost of the software immediately.

  What effect would these policies have on the company

while the payables deferral period would remain unchanged at 35 days. What effect would these policies have on the company's cash conversion cycle? Round to the nearest whole day.

  Find bond current yield and yield to maturity

If the bond sells for its par value, what are the bond's current yield and yield to maturity? Round your answers to two decimal places.

  Though in real life we need multiperiod applications of

the capm is a one-period model. however in real life we need multiperiod applications of capm that relies on the

  Create a plan to pay off his student loans

Kyle used the Quantitative Reasoning Procees to create a plan to pay off his student loans of $6,040.

  What will be the firm cash cycle

Assuming that all of LilyMac's sales are on credit, what will be the firm's cash cycle? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places.)

  Find the 95 confidence interval of the population mean age

in a study of 10 insurance sales representatives from a certain large city the average age of the group was 48.6 years

  Estimate effect of synergies on enterprise value

Identify the synergies and conduct a sensitivity analysis to estimate the effect of synergies on enterprise value.

  Why financial manager should concern with quality initiative

Create an argument that explains why financial managers should be concerned with quality initiatives in the health care organization.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd