You Are Purchasing a New Home and Need to Borrow

question 61

Multiple Choice

You are purchasing a new home and need to borrow $380,000 from a mortgage lender. The mortgage lender quotes you a rate of 5.75% 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 5.45% 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 $7600 to cover points you are paying the lender. Assuming you do not pay the points and borrow from the mortgage lender at 5.75%, then your monthly mortgage payment (with payments made at the end of the month) will be closest to ________.

• A) $2439
• B) $2661
• C) $2218
• D) $3105

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Definitions:

North Atlantic Treaty Organization

An intergovernmental military alliance between 30 North American and European countries.

1949

The year notable for several historical events, including the formation of NATO and the conclusion of the Chinese Civil War with the Communist Party of China taking control of Mainland China.

Formed

Established or created with a specific structure or intended purpose.

UN General Assembly

A principal organ of the United Nations, comprising all member states, it serves as a forum for deliberating international issues covered by the UN Charter.