Project #5494 - APPLYING MANAGERIAL FINANCE

 

Assume that your neighbor took a loan of $300,000 four years ago. At that time, she took a 30-

year loan for 5.8%. She now wants to consider re-financing her loan. She went to a bank and was 

told that re-financing her loan for 30 years would cost her $6,000 upfront and re-financing her 

loan for 15 years would cost her $4,000 upfront. Your neighbor is low on cash and would prefer 

to add the upfront fees into her new loan. 

Your neighbor comes to seek your help with her mortgage dilemma. 

Can you use your Time Value of Money skills to help guide your neighbor if she should go for 

re-financing? You can guide her in terms of helping her understand her current interest expense 

versus future interest expense, current PMT versus future PMT, how a 15-year loan versus a 30-

year loan would affect her finances, etc. Help her understand by giving her different scenarios so 

she can make a good decision that suits her best. You can get the current rates from any bank 

website by searching under Mortgage Rates. 

Provide your work using tables/graphs/explanations. Also, attach a PDF of the website you used 

to obtain the mortgage rates.

Subject Mathematics
Due By (Pacific Time) 05/05/2013 05:00 pm
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