Question

i) 7.35% j) 7-54% k) 8.32% 8. Seven years ago, Bennie took out a loan for the purchase of a home. The loan was for 20 years (monthly payments) in the amount of$300,000 at an interest rate of 4.8%, compounded monthly interest rates have dropped, and he is in the process of refinancing the T an over the remaining 13 years at a rate of 40% com ded monthly. To make the refinance worthwhile the most he should be willing to pay for the refinance charges (at the time of the refinance) is closest to.. a) $10,970 b) $14,082 c) $128,526 d) $55,224 e) $8,774 f) $11,311 8) $22,534 h) $1,132 i) S9,701 j) S10,532 k) $11,730 ) $9,784 m) $9,107 n) $8,438 o) $8,312 P) $11,218 )$12,773 r) $10,711 s) $75,246 t) S116,029 u) $1,973 v) $10,126 $5,781 x) $7,340 y) $3,733

Answer 1

At current situation, Loan amount PV-$300000 Rate of interest per month i 4.896/12:0.40% Number of periods n 20 12-240 months First we calculate the Present Value factor of $1 annuity with the help of information given PVFa- 1-240 PVFa0.04 1.04 -154.0933029 Monthly instalment R-PV/PVFa- 300000/154.093303 -1946.8724 Now let us find the future value of series payments for 7 years i.e. 84 months FVR(1+i)" -1 FV-1946.8724 *1 (1 + 0.4%)84-1 FV 193909.2139 FV of loan after 84 months FV1 PV" (1+0ng4 300000" (1 +0.4%)^84-419520.4450 Loan amount left -FV1-FV 419520.4450-193909.2139-225611.231 Suppose refinancing is done for 13 years at the end of 7 years Loan amount PV2-$225611.231 Rate of interest per month-i 4%/12 0.333333% Number of periods n 13 12-156 months 0.4% PVFa- 10033333352.489536 0.00333333 156 New instalment-PV2/PVFa 225611.231/121.489536-1857.042495

Difference in instalment-1946.87-1857.04-89.82991 PV of annuity of difference amount 89.82991*121.489536-10913.39408 Answer is closest to option a)