Which of the Following Statements Regarding the Break-Even Point for Paying

question 23

Multiple Choice

Which of the following statements regarding the break-even point for paying discount points in order to get a lower interest rate on the loan is correct?

• A)All else equal, the break-even point for paying points on an original mortgage is longer than the break-even point for paying points on a refinance.
• B)All else equal, the break-even point for paying points on an original mortgage is longer for a taxpayer who does not make extra principal payments each year on the loan than for a taxpayer who does make additional principal payments each year on the loan.
• C)All else equal, the break-even point for a taxpayer paying points on an original mortgage is longer when the taxpayer's marginal income tax rate increases in the years subsequent to the original financing compared to a taxpayer whose marginal tax rate does not change in the years subsequent to the year in which the loan is executed.
• D)None of the choices are correct.

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