Question

A "point" is 1% of your borrowed amount on a mortgage. You want to pay 2 points to get a 0.5% reduction in your interest rate on a $175,000 mortgage. How much will you pay in points?

Answer 1

The answer is A ($3,500)

Step-by-step explanation:

I recently got this question and A was the correct answer. I used the same strategy like the one above me and it worked.

Hope it helps!!

Answer 2

The answer is $3500.

You are simply asking for the equivalent of 2 points for the mortgage of $175,000. Since 1 point is equal to 1% of the mortgage, 2 points is 2% of the mortgage then.

Equation:
Y = P% * X
Y = 2% * 175000

Convert P into decimal: P = 2/100 = 0.02

Y = 0.02 * 175000
Y = 3500