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You are buying a house and will borrow $185,000 on a 25-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.20 percent. Alternatively, she tells you that you can "buy down" the interest rate to 3.90 percent if you pay points up front on the loan. A point on a loan is 1 percent (one percentage point) of the loan value. How many points, at most, would you be willing to pay to buy down the interest rate? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.164. Answer is complete but not entirely correct. Maximum points 141.104

You are buying a house and will borrow $185,000 on a 25-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.20 percent. Alternatively, she tells you that you can "buy down" the interest rate to 3.90 percent if you pay points up front on the loan. A point on a loan is 1 percent (one percentage point) of the loan value. How many points, at most, would you be willing to pay to buy down the interest rate? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.164. Answer is complete but not entirely correct. Maximum points 141.104

Essentials Of Investments
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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You are buying a house and will borrow $185,000 on a 25-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.20 percent. Alternatively, she tells you that you can "buy down" the interest rate to 3.90 percent if you pay points up front on the loan. A point on a loan is 1 percent (one percentage point) of the loan value. How many points, at most, would you be willing to pay to buy down the interest rate? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.164. Answer is complete but not entirely correct. Maximum points 141.104
Transcribed Image Text:You are buying a house and will borrow $185,000 on a 25-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.20 percent. Alternatively, she tells you that you can "buy down" the interest rate to 3.90 percent if you pay points up front on the loan. A point on a loan is 1 percent (one percentage point) of the loan value. How many points, at most, would you be willing to pay to buy down the interest rate? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.164. Answer is complete but not entirely correct. Maximum points 141.104
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