Considering the Following Information, What Is the NPV If the Borrower

question 3

Multiple Choice

Considering the following information, what is the NPV if the borrower refinances the loan? Expected holding period: 15 years, Current loan balance: $100,000; Current loan interest: 7%; Current loan mortgage payment: $898.33; Remaining term on current mortgage: 15 years; New loan interest: 5.5%; New loan mortgage payment: $817.08; New loan term: 15 years; Cost of refinancing: $$5000. Assume that the opportunity cost is the interest rate on the new loan (5.5%) .

• A) -$5,000.00
• B) -$56.52
• C) $4,943.48
• D) $9,943.48

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Definitions:

Limited Service

Refers to a business model where only a partial range of services is offered to customers as opposed to full-service alternatives.

Service Retailer

A business that sells intangible products or services directly to consumers.

Low Prices

The strategy of setting the cost of a product or service lower than the competition, often to attract more customers or gain a market share.

Experiential Retail

A retail strategy that focuses on providing customers with experiences beyond the traditional shopping encounter to engage and entertain.