a long menu of loan options. For each option, there is charged and an interest rate given. The amount of the here from -1% to 3%. When would it be optimal for yo vith a point of 2%? (Assume there is no affordability cc ave the money to buy whatever point you would like). you have a very short holding period ever you have a very long holding period
a long menu of loan options. For each option, there is charged and an interest rate given. The amount of the here from -1% to 3%. When would it be optimal for yo vith a point of 2%? (Assume there is no affordability cc ave the money to buy whatever point you would like). you have a very short holding period ever you have a very long holding period
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Suppose you are shopping for a mortgage and the lender presents you
with a long menu of loan options. For each option, there is a discount
point charged and an interest rate given. The amount of the point ranges
anywhere from -1% to 3%. When would it be optimal for you select a
loan with a point of 2%? (Assume there is no affordability constraint, ie:
you have the money to buy whatever point you would like).
If you have a very short holding period
O Never
If you have a very long holding period
Only when the point is equal to the effective borrowing cost
O Always
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