Question

10 Homework Problems A few years back, Dave and Jana bought a new home They bo owed $230,415 at an annual fixed rate of 5 49% (15-year term with mothly payments of $1,881.46. They just made their 25th payment, and the current balance on the lean is $208,555 87 Interest rates are at an al-time Ow, and Dave and Jana are thinking of refinancing to a new 15-year fled loan. Their bank has made the following offer: 15-year term, 30%, plus out- of-pocket costs of $2,937. The out-of pocket cests must be pald in full at the time of refinancing Buid a spreadsheet model to evaluate this offer. The Excel function PMT(rate, nper, pv, fw, type) calculates the payment for a loan based on constant payments and a constant interest rate. The arguments of this function are ın o rate - the interest rate for the loan per-the totai number of payments pv-present value (the out borrowed) N future value (the desired cash balance after the last payment (usualy 0)) tpe payment type (O-end of period, 1 - beginning of the period example, for Dave and Jana's original loan, there will be 180 payments (12 15-180), so we would use PMT(O.0549/12, 180, 230415,0,0)-$1,881.46. Note that because payments are made monthly, the month annusl interest rate must be expressed as a monthly rate. Also, for payment calculations, we assume that the payment is made at the end of the The savings from refinancing occur over time, and therefore need to be discounted back dollars is to current dollars The formula for converting K dolars saved t months from now to current 阿 (1+r) nhere r is the monthly inflation rate. Assume that0.002 and that Dave and Jana make their payment at the end of each month Use your model to calculate the savings in current dollars If required, round your answer to the nearest whole dolar amount If your answer is negative use "minus sign associated with the refinanced loan versus staying with the original loan

Answer 1

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