51. A buyer makes a 25% down payment on their home. They obtain a loan commitment for $240,000. The purchase price is:
Answer: C
The purchase price is $320,000.
To determine the purchase price of the home, we can use the down payment percentage and the loan amount. Since the buyer makes a 25% down payment, it follows that the loan represents 75% of the purchase price. Thus, if the loan amount is $240,000, the total purchase price can be calculated as $240,000 divided by 0.75, resulting in $320,000.
A) $265,000
This option is incorrect because if the purchase price were $265,000, the loan amount would be 75% of this price, which calculates to $198,750. This does not match the given loan commitment of $240,000.
B) $300,000
This option is also incorrect. If the purchase price were $300,000, the loan amount would be 75% of this total, resulting in $225,000. This amount is still lower than the actual loan commitment of $240,000, making it an invalid choice.
C) $320,000
This option is correct as it accurately reflects the calculation based on the loan commitment. If the purchase price is $320,000, then the buyer's 25% down payment is $80,000, and the remaining loan amount of $240,000 constitutes 75% of the total price.
D) $345,000
This option is incorrect because if the purchase price were $345,000, the loan amount would be calculated as 75% of this total, resulting in $258,750. This exceeds the specified loan commitment of $240,000, making it an invalid option.
Conclusion
The correct purchase price of $320,000 is derived from the loan commitment of $240,000, which represents 75% of the total price. Other options do not meet the criteria established by the given loan amount and down payment percentage, leading to their rejection. Thus, option C is the only valid answer.