Question

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Purchasing discount points is a decision which can be financially justified or not justified. Create a unique example where purchasing discount points is not justified, solve the problem, and explain why the decision isn't justified.

Answer 1

I believe this question is referring to purchasing a discount on a loan's interest rate by putting more towards closing costs. For mortgages, sometimes they will allow you to "buy" a smaller interest rate. For example:
Loan A has an interest rate of 4.5% and no closing costs.
Loan B has an interest rate of 4.375%, but has $1000 in closing costs.

Normally, Loan A would be the better choice if you plan on keeping the home short term, but Loan B would be more beneficial for keeping the loan long-term. I don't really care to spend the time that is necessary to come up with an actual scenario, but I hope that helps enough for you to understand the question.