Reference no: EM132818092

Questions -

Q1. Randall and Augustine are financing $148,000 to purchase a condominium. They obtained a 15-year, fixed-rate loan with a rate of 4.95%. They have been given the option of purchasing up to five points to lower their rate to 4.73%. How much will the five points cost them?

A. $7,000.40

B. $325.60

C. $1,480.00

D. $7,400.00

Q2. Barry and Bernice have obtained a 30-year, fixed rate mortgage for $635,250 with a 7.35% interest rate. They purchased 2 points and their rate is now 6.925%. Factoring in the cost of points, when is the break-even point on their mortgage?

A. 2 years, 11 months

B. 3 years, 11 months

C. 5 years, 10 months

D. 2 years, 4 months

Q3. Leah is financing $340,000 to purchase a house. How much money will she save over the life of a 30-year, fixed-rate loan by buying 3 points with a rate of 6.475% instead of not buying points with a rate of 6.85%?

A. $30,398.40

B. $3,039.84

C. $13,239.84

D. $20,198.40

Q4. Karen is deciding between two loans.

Loan A Loan B

$257,000 $257,000

30 year fixed 30 year fixed 6.24% 5.95%

0 discount points two discount points M=$1582.39 M=$1532.59

Karen has calculated all of the associated fees as well as any other expenses. She has $5,500 available to purchase the points, and plans to stay in the house for half the length of the loan.

Which statement represents the best financial decision?

A. Karen should purchase the discount points because she will be in the house long enough to justify the purchase.

B. Karen should purchase the discount points because doing so lowers her interest rate.

C. Karen should not purchase the discount points because she does not have enough available cash.

D. Karen should not purchase the discount points because she will not be in the house long enough to justify the purchase.