FinanceQuestion 75 of 100
A buyer pays 2 discount points on a $200,000 loan. How much do the points cost?
a.$4,000
b.$2,000
c.$400
d.$8,000
Explanation
One discount point equals 1% of the loan amount, so 2 points is 2% of $200,000 = $4,000. Points are paid at closing to lower the loan's interest rate. They effectively prepay interest to buy down the rate.
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