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A borrower has secured a 30 year, $150,000 loan at 7% with monthly payments. Fifteen years...

A borrower has secured a 30 year, $150,000 loan at 7% with monthly payments. Fifteen years later, the borrower has the opportunity to refinance with a fifteen year mortgage at 6%. However, the up front fees, which will be paid in cash, are $2,500. What is the return on investment if the borrower expects to remain in the home for the next fifteen years?

(A) 6.00% (B) 7.00% (C) 13.00% (D) 22.62% (E) 28.89%

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Answer #1

Monthly rate=7%/12

Monthly Installment=PMT(C8,C9,C7)
Amount remain After 15 years=FV(C8,C10,C11,C7)
Monthly installment at Reduced rate=PMT(0.5%,C10,C12)
Saving In Interest=C11+C13
Rate of return=RATE(C10,C14,2500,0)*12

I hope my efforts will be fruitful to you

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