You plan to purchase a house for $115,000 using a 30-year mortgage from your local bank. You will make a down payment of 20% of the purchase price.

1. 1. Your bank offers you the following two options for payment:

Your bank offers you the following two options for payment:

• Option 1: Mortgage rate of 10.25% and 1 discount point.

Option 2: Mortgage rate of 10% and 2.5 discount points.

Which option would you choose? [Hint: consider only the incremental costs and benefits of Option 2 with respect to Option 1]

1. 1. Your bank offers you the following two options for payment:

Option 1: Mortgage rate of 9% and zero discountpoints.

Option 2: Mortgage rate of 8.85% and two discountpoints.

Whichoption would you choose?

1. 1. Your bank offers you the following two options for payment:

Option 1: Mortgage rate of 10.25% and 1 discountpoint.

Option 2: Mortgage rate of 10% and 2.5discount points.

Whichoption would you choose? [Hint: consideronly the incremental costs and benefits of Option 2 with respect to Option 1]