You plan to purchase a house for $166,000 using a 15-year mortgage obtained from your local bank. You will make a down payment of 15 percent of the purchase price. You will not pay off the mortgage early. Assume the homeowner will remain in the house for the full term and ignore taxes in your analysis. Your bank offers you the following two options for payment. Option 1: Mortgage rate of 7 percent and zero points Option 2: Mortgage rate of 6.75 percent and 3 points Which option should you choose? Option 1 None is the correct answer Option 2

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
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You plan to purchase a house for $166,000 using a 15-year mortgage obtained from your local bank. You will make a
down payment of 15 percent of the purchase price. You will not pay off the mortgage early. Assume the homeowner
will remain in the house for the full term and ignore taxes in your analysis.
Your bank offers you the following two options for payment.
Option 1: Mortgage rate of 7 percent and zero points
Option 2: Mortgage rate of 6.75 percent and 3 points
Which option should you choose?
Option 1
None is the correct answer
Option 2
Indifferent between the two options
Transcribed Image Text:You plan to purchase a house for $166,000 using a 15-year mortgage obtained from your local bank. You will make a down payment of 15 percent of the purchase price. You will not pay off the mortgage early. Assume the homeowner will remain in the house for the full term and ignore taxes in your analysis. Your bank offers you the following two options for payment. Option 1: Mortgage rate of 7 percent and zero points Option 2: Mortgage rate of 6.75 percent and 3 points Which option should you choose? Option 1 None is the correct answer Option 2 Indifferent between the two options
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