Suppose a.home owner has an existing mortgage loan with these terms: remaining balance ofSh. 50,000, interest rate of 8% and remaining term of 10 years (monthly payments). The loancan be replaced by a loan at an interest rate of 6% at a cost of 8% of the outstanding loanamount Should the home owner refinance? What difference would it make if the home ownerexpecis to be in the home for only five more years?.

Loan payments: These represent payments made by the borrower to the lender for amortizing the loan…

can be replaced by a loan at an interest rate of 6% at a cost of 8% of the outstanding loan amount Should the home owner refinance? What difference would it make if the home owner expects to be in the home for only five more years?

can be replaced by a loan at an interest rate of 6% at a cost of 8% of the outstanding loan amount Should the home owner refinance? What difference would it make if the home owner expects to be in the home for only five more years?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Factors Affecting Housing Decision

Question

Suppose a.home owner has an existing mortgage loan with these terms: remaining balance of
Sh. 50,000, interest rate of 8% and remaining term of 10 years (monthly payments). The loan
can be replaced by a loan at an interest rate of 6% at a cost of 8% of the outstanding loan
amount Should the home owner refinance? What difference would it make if the home owner
expecis to be in the home for only five more years?.

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