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:

Reported

Refers to the provision of formal statements or accounts of financial activities or conditions.

Net Income

Net income refers to the total profit of a company after all expenses, taxes, and deductions have been subtracted from total revenue.

Accounts

Financial records that track the transactions and balances of specific assets, liabilities, revenues, or expenses.

Balances

The amounts of money recorded in financial accounts, reflecting the difference between credits and debits.