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...


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Suppose you are shopping for a mortgage and the lender presents you<br>with a long menu of loan options. For each option, there is a discount<br>point charged and an interest rate given. The amount of the point ranges<br>anywhere from -1% to 3%. When would it be optimal for you select a<br>loan with a point of 2%? (Assume there is no affordability constraint, ie:<br>you have the money to buy whatever point you would like).<br>If you have a very short holding period<br>O Never<br>If you have a very long holding period<br>Only when the point is equal to the effective borrowing cost<br>O Always<br>

Extracted text: 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 -1% to 3%. When would it be optimal for you select a loan with a point of 2%? (Assume there is no affordability constraint, ie: you have the money to buy whatever point you would like). If you have a very short holding period O Never If you have a very long holding period Only when the point is equal to the effective borrowing cost O Always

Jun 04, 2022
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