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You need to borrow $200,000 to buy your new home

Finance

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You need to borrow $200,000 to buy your new home. You decide to enter into a 30-year mortgage with your local bank, Rady Financial Services, at an Annual Percentage Rate (APR) of 3% and monthly payments. Your first monthly payment will occur 1 month from today.

a) After two years of making payments, what is the total amount of interest you will have paid Rady Financial Services? (3 points)

b) After two years of making payments, you notice that interest rates have fallen and you are considering refinancing the existing principal on your loan at the new lower rate. You learn that the total cost of refinancing will be $14,630. To what APR must have rates fallen in order to make refinancing your loan at this new, lower rate a good idea? Provide the new APR rounded to the nearest tenth of a percent (e.g., 1.7% or 2.1%). (3 points