Please do question 24 and 27, please show work thank you. QUESTION 22 3 points S
ID: 2562040 • Letter: P
Question
Please do question 24 and 27, please show work thank you.
QUESTION 22 3 points Saved Q1-Refinance: Questions(22)-(27) are the sub questions of the Calalation Q,Refinance 1 Ann got a 30 year Fully Amortizing FRM for S600.000 at an annual intrest rate of 5% After 2 years of payments, Ann will refinance the balance into a 28 annually with annual payments. Refinancing will cost Ann 1.25 points plus S1250 in closing costs Ann will prepay the new loan 3 years after refinancing compounded annually with annual payments yearfully Amortizing FRM at an annual interest rate of 3 5% compounded 1. a) What is the Annual payment before refinancing? 39030.86 QUESTION 23 3 points (Continued) 1. (b) What's the loan balance after 2 years? 581486.73 QUESTION 24 Continued) 1. (c) What's the new Annual payment after refinancing? 4 points Save AnswerExplanation / Answer
Answer for question no.24:
After refinance, amount to be paid annually is calculated by using the formula PMT(rate,nper,pv.[FV],[type])
rate=3.5%
nper=28 years
PV=Balance loan amount=$581,4856.73.
Type=0 assuming payment is made at the end of the year.
Subsituting the values in the formula=PMT(.035,28,-5814856.73,,0)
=$32,913.69.
This is the annual payment to be made after refinance.
Answer for question no.27:
Final year cash flow for NPV decision is loan amount outstanding as at the end of 2nd year+closing costs of new loan
=$581,4856.73.+1.25%*($581,4856.73.)+$1,250
=$590,005.32.
This is the total cash flow in the NPV formula for refinancing decision.