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?

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.

step-by-step explanation:

the ratio of red paint to blue paint is always 9/7. that means that, whatever x's value, (4x+12)/(4x-4) has that same ratio. so, set up an equation and cross-multiply to solve for x:

9/7 = (4x+12)/(4x-4)

9(4x-4) = 7(4x+12)

36x - 36 = 28x + 84

8x - 36 = 84

8x = 120

x = 15

explanation:

remove parenthesis:

=

apply rule

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multiply fractions:

=

=

divide:

=

mordancy.