A buyer makes a 20% down payment and pays two discount points totaling $1,000. What was the purchase price if the loan amount was determined using this information?

A buyer makes a 20% down payment and pays two discount points totaling $1,000. What was the purchase price if the loan amount was determined using this information?

• A. $50,000
• B. $62,500
• C. $75,000
• D. $80,000

Answer: (B)

To determine the correct purchase price based on the information provided, we first need to understand how the down payment and the points relate to the loan amount. A down payment of 20% indicates that the loan amount is 80% of the purchase price. Additionally, two discount points, which are each equivalent to 1% of the loan amount, means that the total of $1,000 corresponds to 2% of the loan amount. Let’s break this down: 1. If $1,000 represents 2% of the loan amount, we can find the loan amount by using the equation: \[ Loan\ Amount = \frac{1000}{0.02} = 50,000 \] 2. Given that the loan amount of $50,000 represents 80% of the purchase price, we can find the purchase price by rearranging the formula to find 100% of the purchase price: \[ Purchase\ Price = \frac{Loan\ Amount}{0.80} = \frac{50,000}{0.80} = 62,500 \] This calculation shows that if the loan amount after the down payment is $50

To determine the correct purchase price based on the information provided, we first need to understand how the down payment and the points relate to the loan amount.

A down payment of 20% indicates that the loan amount is 80% of the purchase price. Additionally, two discount points, which are each equivalent to 1% of the loan amount, means that the total of $1,000 corresponds to 2% of the loan amount.

Let’s break this down:

1. If $1,000 represents 2% of the loan amount, we can find the loan amount by using the equation:

[

Loan\ Amount = \frac{1000}{0.02} = 50,000

]

2. Given that the loan amount of $50,000 represents 80% of the purchase price, we can find the purchase price by rearranging the formula to find 100% of the purchase price:

[

Purchase\ Price = \frac{Loan\ Amount}{0.80} = \frac{50,000}{0.80} = 62,500

]

This calculation shows that if the loan amount after the down payment is $50