29. A property sold for $160,000. 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 was $2,400.
To calculate the cost of the discount points, first determine the loan amount by applying the loan-to-value (LTV) ratio of 80% to the property's sale price of $160,000. This results in a loan amount of $128,000. Since there were 2 discount points charged, which are typically 1% of the loan amount each, the total cost amounts to $2,400.
A) 600
Option A is incorrect because calculating 2 discount points based on the loan amount does not yield $600. If 1 discount point were calculated on a smaller loan amount, it might approximate this figure, but with the given sale price and LTV, the figures do not support this conclusion.
B) 1,500
Option B is also incorrect. While it may seem plausible, the calculations based on the loan amount show that 2 discount points would not amount to $1,500. The cost of discount points directly correlates with the loan amount calculated from the property value.
C) 2,400
Option C is correct as it accurately reflects the cost of the discount points. The loan amount, derived from the 80% LTV ratio of the $160,000 sale price, is $128,000. Two discount points equal 2% of this amount, resulting in a total of $2,400.
D) 3,000
Option D is incorrect. This amount would imply a higher percentage of discount points than what was charged. Given the loan amount and the 2 discount points, the calculation does not support a cost of $3,000.
Conclusion
The correct answer is definitively $2,400, as it accurately represents the cost of the 2 discount points charged on the loan amount derived from the property's value. The other options fail to reflect the correct calculations based on the loan-to-value ratio, leading to incorrect figures.