Use estimation to select the best response. Do not calculate. A $49,000 30-year loan at
10% + 1.5 points + $150 origination fee
Would require what monthly income for the buyer?
A) $4,000
B) $13,750
C) $425
D) $1,250
__________ (A, B, C or D)

Question

Quizplus · Accepted Answer

The monthly payment for a $49,000 loan at 10% interest over 30 years would be a significant portion of the loan amount but not overwhelmingly high. Estimating the monthly payment to be around 1/40th of the loan amount gives us approximately $1,225. Adding a bit for the points and origination fee, $1,250 is a reasonable estimate for the required monthly income to cover this payment and other living expenses.

Use Estimation to Select the Best Response