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Suppose you are shopping for a mortgage and the lender presents you with a long menu of loan options. For each option, there is a
Suppose you are shopping for a mortgage and the lender presents you with a long menu of loan options. For each option, there is a discount point charged and an interest rate given. The amount of the point ranges anywhere from -2% to 3%. When would it be optimal for you select a loan with a discount point of 3%?
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If you have a very short holding period
Only when the point is equal to the effective borrowing cost
If you have a very long holding period
Never
Only with an ARM
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