You are considering refinancing a rental property of yours.

Based upon the following data would you refinance? (Show Work) (5 points)

           Current L..;@ 7.5 interest

           New L..;@ 5.5 interest

           Financing costs on new loan:           1 point origination fee

                                                                       1 point discount

                                                                       $600 closing cost

Assume a 20—year term on both loans. No prepayment penalty on current loan.

Investor’s desired rate of return is 10%.

Expected holding period of 5 years.