6. The terms of a mortgage call for a borrower to pay $4000 in loan discount points. If the mortgage is $80000, how many discount points have to be paid?
Answer: C
5 discount points have to be paid.
In this scenario, the borrower must pay 5 discount points on the $80,000 mortgage, which corresponds to the $4,000 required in loan discount points.
A) 3
Choosing 3 discount points would imply a total cost of $2,400 (3% of $80,000), which is significantly less than the $4,000 required. This option does not meet the payment specified in the mortgage terms.
B) 4
Selecting 4 discount points would result in a total payment of $3,200 (4% of $80,000). Although this amount is closer to the required payment, it still falls short of the $4,000 that the borrower must pay.
C) 5
This option accurately reflects the requirement, as 5 discount points corresponds to a payment of $4,000 (5% of $80,000). Thus, this is the correct calculation and meets the mortgage terms.
D) 6
If the borrower paid 6 discount points, the total would be $4,800 (6% of $80,000), which exceeds the required payment of $4,000. Therefore, this option is incorrect as it does not match the mortgage terms.
Conclusion
The correct answer is 5 discount points, as it equates to the exact payment of $4,000 required by the mortgage terms. Options A, B, and D do not fulfill the necessary criteria, either falling short or exceeding the required amount, demonstrating a clear understanding of how discount points are calculated in relation to the total mortgage amount.