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" theinterest 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 loanvalue. 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 points141.104

GivenPrincipal Loan Amount: P = 185,000Interest Rates: r1 = 4.20% = 0.042 r2 = 3.90% = 0.039 Loan…

Answered: You are buying a house and will borrow…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

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