You plan to purchase a house for $250,000 using a 30-year mortgage obtained from your local bank. You will make a down payment of 20 percent of the purchase price and monthly payments. You will not pay off the mortgage early. Your bank offers you the following two options for payment: Option 1: Mortgage rate of 3.75 percent and zero points. Option 2: Mortgage rate of 3.50 percent and 2 points. Which of the following is correct? Round your calculations/answers to two decimals. I. In exchange for $4,000 up front, Option 2 reduces your monthly mortgage payments by $28.14. II. The present value of the monthly savings is less than the points paid up front. III. Option 1 is the better choice. Formulas and Equations M = where P is principal, M is periodic payment, y interest rate, PVIFAny% = In period j, principal repayment is AMj = M Interest payment is is Ij = M[ ]=M - AMj Group of answer choices I only II only I and II only II and III only I, II, and III
You plan to purchase a house for $250,000 using a 30-year mortgage obtained from your local bank. You will make a down payment of 20 percent of the purchase price and monthly payments. You will not pay off the mortgage early. Your bank offers you the following two options for payment: Option 1: Mortgage rate of 3.75 percent and zero points. Option 2: Mortgage rate of 3.50 percent and 2 points. Which of the following is correct? Round your calculations/answers to two decimals. I. In exchange for $4,000 up front, Option 2 reduces your monthly mortgage payments by $28.14. II. The
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