You Need a 30-Year FRM and Have Two Choices

question 19

Multiple Choice

You need a 30-year FRM and have two choices.Option one is 6.50% contract rate with 2.50 discount points and an APR of 6.75%.Option two is 6.75% contract rate with no discount points.Neither loan has any other financing fees.If you plan to hold the loan for five years,which is the better option to minimize your effective borrowing costs?

• A) 6.50% with 2.50 points
• B) 6.75% with no points
• C) doesn't matter,the effective cost is the same
• D) can't determine without knowing the loan amount

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Definitions:

Good Versus Bad

The fundamental binary opposition that reflects moral, ethical, or qualitative judgments about actions, decisions, or objects.

Action-Motivating

Characteristics or incentives that encourage a person to take action or engage in a particular behavior.

Potential Ramifications

Possible consequences or outcomes that could arise as a result of a specific action or decision.

President

The elected head of a republican state or organization who typically represents the leadership or authority.