The terms of a mortgage call for a borrower to pay $3,200 in loan discount points. If the mortgage is $80,000, how many discount points have to be paid

Rationale

4 discount points have to be paid.

Discount points are calculated as a percentage of the loan amount, where 1 discount point equals 1% of the mortgage. In this case, $3,200 represents 4% of the $80,000 mortgage, meaning the borrower needs to pay 4 discount points.

A (3) YOUR ANSWER

If 3 discount points were paid, that would equate to 3% of the mortgage amount. Calculating 3% of $80,000 results in $2,400, which does not match the $3,200 required. Therefore, this choice is incorrect.

B (4) CORRECT

This choice is correct because 4 discount points equal 4% of the mortgage amount. Calculating 4% of $80,000 yields exactly $3,200, which aligns perfectly with the mortgage terms stated in the question.

C (5) YOUR ANSWER

Choosing 5 discount points would imply a payment of 5% of the mortgage. This calculation yields $4,000 (5% of $80,000), which exceeds the required $3,200. Hence, this option is incorrect.

D (6) YOUR ANSWER

If the borrower were to pay 6 discount points, it would be interpreted as 6% of the mortgage, amounting to $4,800 (6% of $80,000). This amount also exceeds the specified payment requirement, making this choice incorrect as well.

Conclusion

In summary, the correct number of discount points to be paid on an $80,000 mortgage for a total payment of $3,200 is 4. Each point corresponds to 1% of the mortgage amount, and thus the calculation confirms the necessity of 4 points to meet the total payment requirement accurately.

The terms of a mortgage call for a borrower to pay $3,200 in loan discount points. If the mortgage is $80,000, how many discount points have to be paid

4 discount points have to be paid.

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