A Borrower Made a Mortgage Loan 7 Years Ago for $160,000

question 1

Multiple Choice

A borrower made a mortgage loan 7 years ago for $160,000 at 10.25% interest for 30 years.The loan balance is now $151,806.62 and rates for this amount are currently 9.0% for 23 years.Origination fees and closing costs are $4,500 and closing costs are not financed by the lender.What is the effective cost of refinancing?

• A) 9.0%
• B) 10.85%
• C) 15.32%
• D) 9.39%

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Definitions:

Total Cost

The complete cost of production, including both fixed and variable costs.

Total Fixed Cost

The sum of all costs that do not change with the level of production or sales over a certain period.

Indirect Manufacturing Cost

Costs related to the production of goods that cannot be directly tied to a specific product, such as factory overhead.

Standard Cost Formula

A calculated estimate of the expected cost of production, including direct labor, materials, and overhead, used for budgeting and variance analysis.