3
QuizMultiple Choice

Mortgages

Question 3 • Applications and Modeling

You have recently taken out a loan for a new home. You place 10% down and finance the remaining balance. As part of the closing cost, you are required to pay 2.5 points. Determine the amount of the loan prior to the addition of the 2.5 points to the loan if the final loan amount was for $151,625. Round your answer to the nearest cent.

Answer
A
$149,384.24
B
$148,651.96
C
$147,926.83
D
$147,208.74

Explanation

The 2.5 points add 2.5% of the original loan to its amount, so the final loan is 102.5% of the original. Divide $151,625 by 1.025 to find the amount before adding the points: $151,625 ÷ 1.025 = $147,926.83, rounded to the nearest cent. This matches choice C, $147,926.83.

AI-written and checked against the verified answer.

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