The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property. Darrell Frye is planning to buy an office building at a cost of $984,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects identical. (Round your answers to the nearest cent. Use this table, if necessary.) hold the building for three years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and (a) What is the amount being financed? $ 885600 (b) If Darrell chooses the 4-point 9% loan, what will be his total outlay in points and payments after 36 months? $ 35424 (c) If Darrell chooses the 3-point 9.25% loan, what will be his total outlay in points and payments after 36 months? %24 (d) If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points and payments after 36 months? %24 (e) of the three choices for a loan, which results in the lowest total outlay for Darrell after 36 months? the 4-point 9% loan the 3-point 9.25% loan the 2-point 9.5% loan
The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property. Darrell Frye is planning to buy an office building at a cost of $984,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects identical. (Round your answers to the nearest cent. Use this table, if necessary.) hold the building for three years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and (a) What is the amount being financed? $ 885600 (b) If Darrell chooses the 4-point 9% loan, what will be his total outlay in points and payments after 36 months? $ 35424 (c) If Darrell chooses the 3-point 9.25% loan, what will be his total outlay in points and payments after 36 months? %24 (d) If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points and payments after 36 months? %24 (e) of the three choices for a loan, which results in the lowest total outlay for Darrell after 36 months? the 4-point 9% loan the 3-point 9.25% loan the 2-point 9.5% loan
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
Section: Chapter Questions
Problem 20P: Alexander Industries is considering purchasing an insurance policy for its new office building in...
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Transcribed Image Text:The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many
points and what rate is optimal is often a matter of how long the buyer intends to keep the property.
Darrell Frye is planning to buy an office building at a cost of $984,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount
points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for three years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and
identical. (Round your answers to the nearest cent. Use this table, if necessary.)
(a)
What is the amount being financed?
$ 885600
(b) If Darrell chooses the 4-point 9% loan, what will be his total outlay in points and payments after 36 months?
$ 35424
(c) If Darrell chooses the 3-point 9.25% loan, what will be his total outlay in points and payments after 36 months?
(d)
If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points and payments after 36 months?
(e)
Of the three choices for a loan, which results in the lowest total outlay for Darrell after 36 months?
the 4-point 9% loan
the 3-point 9.25% loan
the 2-point 9.5% loan
O O O
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