18. A property sold for $150,000. The loan-to-value ratio was 80% and there were 2 discount points charged. Which of the following was the cost of the discount points
Answer: C
The cost of the discount points is $2,400.
The total cost of the discount points charged on the loan can be calculated by first determining the amount of the loan, which is 80% of the property's sale price. From there, the cost of the points can be derived.
A) 600
This option represents an incorrect calculation of the discount points. If the loan amount was calculated as 80% of $150,000, the discount points would not total $600, as this figure is significantly lower than what would result from a proper calculation based on the loan amount.
B) 1,500
Option B is also incorrect. A cost of $1,500 would imply a calculation that does not accurately reflect the loan amount based on the 80% loan-to-value ratio. Since discount points are calculated as a percentage of the loan amount, this figure is too low.
C) 2,400
This option is correct. The loan amount is calculated as 80% of $150,000, which equals $120,000. With 2 discount points charged (where each point is 1% of the loan amount), the cost of the points would be 2% of $120,000, resulting in $2,400.
D) 3,000
This option is incorrect as it overestimates the cost of the discount points. A figure of $3,000 would suggest a higher percentage of the loan amount than the stated 2 points, which does not align with the calculation based on the given loan-to-value ratio.
Conclusion
The correct answer of $2,400 accurately reflects the cost of the discount points based on the loan amount derived from the 80% loan-to-value ratio. All other options either miscalculate the percentage of the loan or fail to adhere to the correct interpretation of discount points in relation to the loan amount.