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:

Barriers to Entry

Factors that make it difficult for new firms to enter a market, such as high start-up costs or strict regulations.

Pure Monopoly

A market structure where a single seller controls the entire market for a product or service, with no close substitutes available.

Close Substitutes

Products or services that can easily replace each other in the eyes of the consumer, resulting in a high degree of interchangeability and competition.

Single Firm

A business or company that operates alone in its industry without competitors.