71. A married couple is planning to purchase a house that costs $86,000. If they obtain a 60% loan and the lender charges a 2.5% loan origination fee and 0.5 discount points, what is the cost of these expenses?
Answer: D
The total cost of the loan origination fee and discount points is $2,580.
To calculate the total expenses for the loan origination fee and discount points, we first determine the loan amount and then apply the respective percentages to it. The cost of these expenses amounts to $2,580.
A) $1,290
This option is incorrect because it underestimates the total expenses. The calculation does not account for both the loan origination fee and the discount points applied to the correct loan amount.
B) $1,548
This option is also incorrect. While it might represent a partial calculation, it fails to correctly incorporate the full percentages of both the loan origination fee and the discount points based on the overall loan amount.
C) $2,350
This option is incorrect as well. It is an incorrect total of the expenses since it does not accurately reflect the total costs derived from the loan origination fee and discount points based on the percentage of the loan amount.
D) $2,580
This option is correct. To calculate the total expenses, first, the loan amount of $51,600 (60% of $86,000) is considered. The loan origination fee amounts to $1,290 (2.5% of $51,600), and the discount points total $258 (0.5% of $51,600). When combined, these costs total $2,580.
Conclusion
The correct answer is $2,580, as it accurately represents the total cost of the loan origination fee and discount points based on the calculated loan amount. All other options fail to correctly compute the total expenses by either miscalculating percentages or adopting incorrect values.