A Homeowner Can Obtain a $250,000,30-Year Fixed-Rate Mortgage at a Rate

question 24

Multiple Choice

A homeowner can obtain a $250,000,30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points.
How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is not invested?

• A)7.15 years
• B)3.33 years
• C)6.04 years
• D)5.90 years
• E)More than 30 years

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Definitions:

Voting Shares

Shares that grant the holder the right to vote on company matters, such as electing the board of directors or making decisions affecting the company's policies.

Shareholders' Equity

The residual interest in the assets of an entity after deducting liabilities, essentially representing the owners' equity in a corporation.

Equity Method

An accounting technique used to record investments in subsidiary companies, where the investment's value is adjusted over time to reflect the investor's share of the subsidiary's profits or losses.

Consolidation

The process of combining the financial statements of several subsidiary companies into the statements of a single parent company, displaying the group's total financial status as a single entity.