Ace the Arizona Real Estate Exam 2025 – Unlock Your Property Dreams!

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Question: 1 / 1505

How much will the four discount points cost Tom on a loan of $77,500?

$1,937

$2,152

$3,100

To determine how much the four discount points will cost Tom on a loan of $77,500, it's important to understand what discount points are. Each discount point is equal to 1% of the loan amount. Therefore, if Tom is considering four discount points, this would be 4% of the loan amount.

First, calculate 1% of the loan amount:

1% of $77,500 is calculated as:

\[ 0.01 \times 77,500 = 775 \]

Now, to find the cost of the four discount points, multiply this amount by 4:

\[ 4 \times 775 = 3,100 \]

Thus, the total cost of the four discount points on a loan of $77,500 is $3,100. This method of calculating points is standard in real estate financing, as points are a way for borrowers to prepay some interest in exchange for a lower interest rate on the loan.

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