67. A borrower pays $200,000 for a home. The buyer makes a down payment of $40,000 and obtains a loan for the balance of the purchase price. The lender charges 4 discount points for the loan. How much will the borrower pay in discount points?
Answer: C
The borrower will pay $6,400 in discount points.
To calculate the amount paid in discount points, we first determine the loan amount, which is the home price minus the down payment. In this case, the loan amount is $200,000 - $40,000 = $160,000. The lender charges 4 discount points, which are calculated as a percentage of the loan amount. Thus, 4% of $160,000 equals $6,400.
A) $1,600
This option is incorrect because $1,600 represents 1 discount point on a loan amount of $160,000, which is only 1% of the loan. The question specifies 4 discount points, not 1.
B) $4,000
This option is incorrect as well. $4,000 would represent 2.5 discount points on the loan amount of $160,000. Since the lender charges 4 discount points, this option does not accurately reflect the total amount owed in points.
C) $6,400
This option is correct. The calculation of 4 discount points on the loan amount of $160,000 indeed results in $6,400, confirming that this is the correct answer to the question posed.
D) $8,000
This option is incorrect. $8,000 would represent 5 discount points on the loan amount of $160,000, which exceeds the 4 discount points charged by the lender. Therefore, this option does not match the conditions of the question.
Conclusion
The correct answer, $6,400, is derived from the proper calculation of 4 discount points applied to the loan amount of $160,000. All other options fail to represent the accurate percentage of points charged by the lender, demonstrating a misunderstanding of the calculation method for discount points.