You are buying a house and will borrow $330,000 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 4.15 percent. Alternatively, she tells you that you can "buy down" the interest rate to 3.8 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? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)
You are buying a house and will borrow $330,000 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 4.15 percent. Alternatively, she tells you that you can "buy down" the interest rate to 3.8 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? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)
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:Problem 4-43 Present Value and Multiple Cash Flows
You are buying a house and will borrow $330,000 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 4.15 percent. Alternatively, she tells you that you can "buy down" the
interest rate to 3.8 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? (Do not round intermediate calculations
and round your answer to 3 decimal places, e.g., 32.161.)
Maximum points
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