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

question 6

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: 9 %,New loan interest: 7.5 %,Cost of refinancing: $4,250

• A)-$5,003
• B)-$1,014
• C)$5,163
• D)$9,413

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Definitions:

Decision Tree

A graphical representation of decision-making processes, showing different choices and their potential outcomes, including chance event outcomes, resource costs, and utility.

Revenue Management

A strategic approach to selling a limited inventory of goods or services to maximize revenue, often used in airlines, hotels, and other sectors.

Expected Value

The weighted average of all possible values of a random variable, with the weights being the probabilities of occurrence.

Full-Fare Ticket

A type of airline or travel ticket that has no restrictions and is often refundable, representing the highest fare category.