Explanation:
The correct answer is B ($101).
Step 1: Calculate the original monthly payment (PMT) at 6%.
Where:
Step 2: Calculate the outstanding balance after 10 years (120 months).
Where n = remaining 60 months:
\text{BV} = 4{,}219.28 \times \frac{1 - (1.005)^{-60}}{0.005} \approx \`$218`{,}265Step 3: Calculate the new monthly payment at 5% for the remaining 60 months.
Step 4: Calculate the monthly savings.
\text{Monthly Savings} = \`$4`{,}219.28 - \`$4`{,}118.36 \approx \`$100.92` \approx \`$101`Therefore, refinancing at the lower rate would result in a monthly saving of approximately $101.
Q.3467 Consider a 15-year $500,000 mortgage with a rate of 6 percent. Ten years into the mortgage, rates have fallen to 5 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate? (Round your answer to the nearest unit.)
A
$265
B
$101
C
$0
D
$111
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