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How is the prepayment option value incorporated in the

Question: a. Why might it not make sense to refinance a loan with a prepayment option as soon as the market yield on new loans dips below the contract rate on the old loan?

b. How is the prepayment option value incorporated in the classical NPV investment decision criterion applied to the refinancing decision?

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Finance Basics: How is the prepayment option value incorporated in the

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