Problem $21-13$ Prepayments $($LO$3,$ CFA$1)$

Consider a $20-$year, $$180,000$ mortgage with a rate of $6\mathrm{.}3$ percent. Four years into the mortgage, rates have fallen to $5$ percent. Suppose the transaction cost of obtaining a new mortgage is $$1,900.$

Should the homeowner refinance at the lower rate?

multiple choice

Yes

No

Quantify the effect of the homeowner's decision.

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places. Problem $21-13$ Prepayments $($LO$3,$ CFA$1)$

Consider a $20-$year, $$180,000$ mortgage with a rate of $6\mathrm{.}3$ percent. Four years into the mortgage, rates have fallen to $5$ percent. Suppose the

transaction cost of obtaining a new mortgage is $$1,900.$

a$.$ Should the homeowner refinance at the lower rate?

Yes

No

b$.$ Quantify the effect of the homeowner's decision.

Note: Do not round Imtermedlate calculatlons. Round your answer to $2$ clec Imal places.

Monthly savings