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iogann1982 [59]
4 years ago
5

Dominic considers buying 2 points on a 25-year, fixed rate mortgage for $187,600. His interest rate will be 5.45% if he does not

purchase the
points. If he does purchase the points, his interest rate will decrease to 5.2%. What would be the break-even point on Dominic's mortgage
considering the cost of the points?
Mathematics
1 answer:
algol [13]4 years ago
3 0

Answer:

If Dominic buys 2 points (2% of the loan value) he will get a better rate and hence less payment.  The question is asking how long will it take him to save the initial investment of 2% of the loan value due to a smaller payment.  The monthly payment at 5.45% is  $1,146.43,  the monthly payment for 5.2% is  $1,118.66.  This is a difference of  $27.77 per month.  The 2 points will cost him  $3,752.00.  The question is asking how long will it take Dominic to re-coup his  $3,752.00 if he saves $27.77 per month.  Just divide the 2 numbers and you get  135.10 months.  If you divide that by 12 you get 11.26 years, which is roughly 11 years, 4 months.

Step-by-step explanation:

Here is what the question is asking.  If Dominic buys 2 points (2% of the loan value) he will get a better rate and hence less payment.  The question is asking how long will it take him to save the initial investment of 2% of the loan value due to a smaller payment.  The monthly payment at 5.45% is  $1,146.43,  the monthly payment for 5.2% is  $1,118.66.  This is a difference of  $27.77 per month.  The 2 points will cost him  $3,752.00.  The question is asking how long will it take Dominic to re-coup his  $3,752.00 if he saves $27.77 per month.  Just divide the 2 numbers and you get  135.10 months.  If you divide that by 12 you get 11.26 years, which is roughly 11 years, 4 months.

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<h2>Hello!</h2>

The answer is:

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<h2>Why?</h2>

To solve the problem, we need to use the given information about the two points of observation, since both are related (both finish and start at the same horizontal distance) we need to write to equations in order to establish a relationship.

So, writing the equations we have:

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tan(\alpha )=\frac{DistanceToTheTopOfTheLightningRod}{BuildingBase}\\\\tan(38\°)=\frac{DistanceToTheTopOfTheLightningRod}{BuildingBase}

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tan(38\°)=\frac{DistanceToTheTopOfTheLightningRod}{BuildingBase}\\\\DistanceToTheTopOfTheLightningRod=tan(38\°)*BuildingBase\\\\DistanceToTheTopOfTheLightningRod=tan(38\°)*500feet=390.64feet

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Rounding to the nearest foot, we have:

LightningRodHeight=y-x=390.64feet-363.27feet=27.37feet=27.4feet

Hence, the answer is:

The height of the lightning rod is 27.4 feet.

Have a nice day!

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