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You are buying a house and the mortgage company offers to let you pay a point (1.0% of the total amount of the loan) to red

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Answer #1

Loan amount = Present value of future monthly payments = monthly payment * [1-(1+i)^-n]/i

i = interest rate per period

n = number of periods

at 6.34%

Loan amount = 406000

monthly payment * [1-(1+0.0634/12)^-360]/(0.0634/12) = 406000

monthly payment = 2523.63

at 6.09% and 1 point

Loan amount = 406000 * 1.01

monthly payment * [1-(1+0.0609/12)^-360]/(0.0609/12) = 406000 * 1.01

monthly payment = 2445.60

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