b) You bought a house a year ago for $250,000, borrowing $200,000 at quoted rate of 12% annual from TD bank, with semi-annual compounding, on a 25-year loan. Interest rates have since come down to 9%. You can refinance your mortgage at this new rate. i) How much are your monthly payments on your current loan (at 12%)? ii) How would your monthly payments change if you could refinance your mortgage at 9% (with a 24-year term loan)? iii) Suppose you kept your monthly payments at the original amount found above at 12%, but refinanced at 9%, how long would it take you to pay off your mortgage?

b) You bought a house a year ago for $250,000, borrowing $200,000 at quoted rate of 12% annual from TD bank, with semi-annual compounding, on a 25-year loan. Interest rates have since come down to 9%. You can refinance your mortgage at this new rate. i) How much are your monthly payments on your current loan (at 12%)? ii) How would your monthly payments change if you could refinance your mortgage at 9% (with a 24-year term loan)? iii) Suppose you kept your monthly payments at the original amount found above at 12%, but refinanced at 9%, how long would it take you to pay off your mortgage?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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