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

question 32

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 these statements is correct.

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Definitions:

Misinformation

False or inaccurate information that is spread, intentionally or unintentionally, which can influence memory and perception.

Distress

Acute stress or discomfort resulting from situations perceived as threatening or overwhelming.

Misinformation Effect

Information received from others about an event that can alter a memory to conform to the information received from other people.

Plausibility

The quality of appearing to be reasonable or probable, often used in the context of arguments or theories.