Refinancing OptionIn-Class Case Study LabRefinancing OptionIn-Class Case Study LabEGR 312-5 (Summer '08)Refinancing OptionIn-Class Case Study LabBackground:When moving to Macon, I took out a 15 year $100,000 loan with a 6.125% APR, compounded monthly. I have already made 12 payments. Question 1: What is my current P&I payment (what is A on this 15 year $100,000 loan)?AA = Question 2: What is the present value and future value of the remaining payments of my current loan?PA = FA = I have a chance to refinance by taking out another 15 year $99,200 loan with a 4.75% APR, compounded monthly. (Note the principle is different because new closing costs ($3,200) have been rolled into the remaining principle of the existing loan ($96,000), so that no out of pocket expenses are incurred).Question 3: What is the new P&I payment?AB = Question 4: What is the present value and future value of this new loan (this is an easy question)?PB =FB = Question 5: What will be the present value and future value of each loan in two years (24 months)? Keep in mind that 12 months had already been paid on the first option.PA-2 =FA-2 =PB-2 =FB-2 =EGR 312-5 (Summer '08)Refinancing OptionIn-Class Case Study LabQuestion 6: The difference between the monthly installments of each option is approximately $79. What is the future worth of these monthly savings two years from now, if I invested this savings in a Money Market paying 3%?F = Question 7: Clearly, if I were to keep the home for 15 years, re-financing would be the best option since FB < FA. However, would you advise me to re-finance my loan if I plan on moving in 2
View Full Document
Unlocking...