Suppose That You Are in the Process of Deciding Whether

Multiple Choice

Suppose that you are in the process of deciding whether or not to refinance your fixed rate mortgage at a lower rate and you are interested in using the payback period rule of thumb to help you in your decision. Your lender has informed you that the cost of refinancing would be $4,300. If your original monthly mortgage payment was $1,250 and your new monthly mortgage payment would be $1,150 after refinancing, determine the payback period.

A) 3 months
B) 4 months
C) 43 months
D) 158 months