Use the Information for the Question(s)below

question 38

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 $5 000 to cover points you are paying the lender.
-Assuming you pay the points and borrow from the mortgage lender at 6.00%, then your monthly mortgage payment (with payments made at the end of the month) will be closest to:

• A)$1 570
• B)$1 540
• C)$1 530
• D)$1 500

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Definitions:

Adjustment Recognition

The process of incorporating adjustments into financial statements for more accurate representation of financial positions or to reflect specific accounting standards.

Equity Profits

Profits that result from an investor's share in the earnings of an equity-accounted investee, reflecting the investor's ownership interest in the investee.

Dividend Revenue

Income earned from owning shares in a company that pays dividends out of its profits to shareholders.

Investment Carrying Amount

The value at which an investment is recognized in the balance sheet after deducting any impairment or amortization.