Use the Information for the Question(s)below

question 33

Multiple Choice

Use the information for the question(s) below.
You are purchasing a new home and need to borrow $250,000 from a mortgage lender.The mortgage lender quotes you a rate of 6.25% APR for a 30-year fixed rate mortgage.The mortgage lender also tells you that if you are willing to pay two points,they can offer you a lower rate of 6.0% APR for a 30-year fixed rate mortgage.One point is equal to 1% of the loan value.So if you take the lower rate and pay the points,you will need to borrow an additional $5000 to cover points you are paying the lender.
-Assuming you do not pay the points and borrow from the mortgage lender at 6.25%,then your monthly mortgage payment (with payments made at the end of the month) will be closest to:

• A)$1570
• B)$1530
• C)$1540
• D)$1500

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Definitions:

Invisible Hand

A metaphor introduced by Adam Smith to describe the self-regulating nature of the market whereby individuals working for their own interest inadvertently benefit society.

Society's Interests

The collective concerns or priorities of a community or population, often related to welfare, health, and economic prosperity.

Self-Interest

An individual's personal gain or advantage, often considered as a driving force behind economic activity and decision-making.

Market System

In this economic framework, the determination of investment, manufacturing, and allocation follows the principles of supply and demand, allowing prices for goods and services to be set freely within an open pricing system.