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7. You’ve found a $200,000 home that you want to buy. A mortgage broker gets you a 7% APR on a 30 year loan with monthly payments. Your first payment is due in one month.

• What will your monthly payments be? (5)

• One option that the broker offers you is a point-paydown. You can pay an extra "point" equal to $2000 (1% of the mortgage value) in return for a lower rate on the loan, 6.75% APR.

If you are only planning to be in the house for 6 years, is this option a good deal? (6)

• 6 years into the mortgage, you sell the house for $225,000. After you pay off your mortgage balance (assume your mortgage rate is the first one: 7% APR), how much of the proceeds from the sale will you be left with? (7)

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