Is the following statement true or false? If you obtain a quotation for a home costing $360,000, obtain a 30-year loan at $4.5 \% + \frac { 3 } { 4 } \text { point } + \$ 100$ , and make a 10% down payment, you can find the comparison rate as follows: $\text { COMPARISON RATE } = 4.5 + 0.125 \left( 0.75 + \frac { 100 } { 324,000 } \right) \approx 4.59 \%$

Question

Quizplus · Accepted Answer

The calculation for the comparison rate in the statement is incorrect because it does not accurately account for how points and fees are factored into the overall cost of the loan over its term. Points are prepaid interest, and the calculation for their impact on the effective interest rate (comparison rate) should consider the loan amount after the down payment and how points reduce the loan balance, not just add a percentage directly to the interest rate.

Is the Following Statement True or False? If You Obtain 4.5%+34 point +$1004.5 \% + \frac { 3 } { 4 } \text { point } + \$ 1004.5%+43​ point +$100

Is the Following Statement True or False? If You Obtain $4.5 \% + \frac { 3 } { 4 } \text { point } + \$ 100$