1.

Randall and Augustine are financing $148,000 to purchase a condominium. They obtained a 15-year, fixed-rate loan with a rate of 4.95%. They have been given the option of purchasing up to five points to lower their rate to 4.73%. How much will the five points cost them? (2 points)

	$7,000.40
	$325.60
	$1,480.00
	$7,400.00

2.

Leah is financing $340,000 to purchase a house. How much money will she save over the life of a 30-year, fixed-rate loan by buying 3 points with a rate of 6.475% instead of not buying points with a rate of 6.85%? (3 points)

	$30,398.40
	$3,039.84
	$13,239.84
	$20,198.40

3.

Lenny and Lisa have obtained a 30-year, fixed rate mortgage for $675,250 with a 7.25% interest rate. They purchased 3 points and their rate is now 6.875%. Factoring in the cost of points, when is the break-even point on their mortgage? (2 points)

	3 years, 4 months
	4 years, 5 months
	8 years, 7 months
	9 years, 11 months

4.

Estella is deciding between two loans.

Loan A	Loan B
$207,000 20-year fixed 7.85% 0 discount points M=$1712.16	$207,000 20-year fixed 7.65% 2 discount points M=$1686.62

She has calculated all of the associated fees as well as any other expenses. She has $5,500 available to purchase the points, and plans to stay in the house for half the length of the loan. Which statement represents the best financial decision? (3 points)

	Estella should purchase the discount points because she has enough available cash.
	Estella should not purchase the discount points because she does not have enough available cash.
	Estella should purchase the discount points because she will be in the house long enough to justify the purchase.
	Estella should not purchase the discount points because she will not be in the house long enough to justify the purchase.

5.

Purchasing discount points is a decision which can be financially justified or not justified. Create a unique example where purchasing discount points is justified, solve the problem, and explain why the decision is justified. Your example should include the following: principal amount being financed, number of discount points, interest rates with and without points, and the monthly payment amounts with and without points. (5 points)