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A loan company will provide a loan to Bill and Hillary for 75% of the appraised value of their home. The interest rate is 10.5%. The first monthly interest payment is $820. The bank requires 4 discount points (hint: a discount point is 1% of the loan amount) to obtain this interest rate. How much will the discount points cost?

Respuesta :

Answer:

The discount points will cost 3749.

Step-by-step explanation:

The first monthly interest payment is $820.

So, annual interest paid = [tex]820\times12[/tex] = $9,840

Now, converting the annual interest to decimal = [tex]\frac{9840}{0.105}[/tex] = $93,714.28

As given, the bank requires 4 discount points, this becomes 0.04.

So, total loan amount = [tex]93714.28\times0.04[/tex] = $3748.57 ≈ $3749

Hence, the discount points will cost 3749.

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