Rhonda wants to take out a 30-year, $280,000 loan with a 4.4% APR. She is considering purchasing 2 points, which will decrease her APR by 0.125% per point. Each point will cost 1% of her loan. Compare her monthly payments WITH and WITHOUT the purchase of the points. HELP!!!

Given Information:

Loan amount = $280,000

Annual Percentage Rate = APR = 4.4% = 0.044

Number of years = 30

Required Information:

Monthly payment with points = ?

Monthly payment without points = ?

Monthly payment with points = $1,361

Monthly payment without points = $1,402.13

Step-by-step explanation:

The monthly payment can be found using,

P is the loan amount.

Where interest rate r is given by

Total number of payments n are given by

Monthly payment with points:

Rhonda is considering purchasing 2 points and each decreases APR by 0.125%

So the APR becomes

and the corresponding interest rate r is

Finally, the monthly payment is

Monthly payment without points:

Interest rate r is,

Monthly payment is,

So monthly payment with points is $1,361 and monthly payment without points is $1,402.13

step-by-step explanation:

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