Considering the following information, what is the NPV if the borrower refinances the loan? Expected holding period: 3 years; current loan balance: $400,000; current loan interest: 5.875%; remaining term on current mortgage: 15 years; new loan interest: 3.625%; new loan term: 15 years; cost of refinancing: $6,000. Assume that the opportunity cost is 10%. Should the borrower refinance

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Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.