15. Problem A Mortgage broker offers you a mortgage after netting the down-payment of $175,000.00 for a 30-year mortgage. He notifies you that your credit-report results in a rate of interest (APR) of 5.00%, however he offers you the ability to pay 7 points into the mortgage to reduce the rate of interest. Each Mortgage Point represents 1% of the mortgage balance, which you pay upfront. and every 1.5 points will earn you approximately 0.25% reduction in interest rate on the mort gage. He also comments that there is, of course, his origination fee of $1,150.00. To determine whether or not you should pay the points compute the true adjusted APY of the mortgage (a) 0.37% (b) 4.45% (c) 3.90% (d) 3.19% 6 Solution Must be done on your calculator:1) Solve the PMT for the mortgage indusive of total points and fees. Total Mortgage Mortgage +Points +Fees: Total Mortgage-175,000.00 + 7.00 * 1% * 175000.00 1150.00-188.400.00 New Rate-0.05-7.00/1.5 * (0.25%)-0.04 Note, this rate may be rounded in solution for clarity, but not final calculation. Use as many significant digits as are required. 188, 400.00 1+0.04/12)-30-12 881.44 (0.04/12) Now solve for the RATE in your calculator using that PMT, with the original mortgage balance of $175,000.00. Remember to keep PV positive and PMT negative. FV-0. Answer is RATE 4.45%