Use the Information for the Question(s) Below

Use the information for the question(s) below.
Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4,000 (paid at the end of each month). Your firm can borrow at 6% APR with quarterly compounding.
-You are purchasing a new home and need to borrow $325,000 from a mortgage lender.The mortgage lender quotes you a rate of 6.5% APR for a 30-year fixed rate mortgage (with payments made at the end of each month).The mortgage lender also tells you that if you are willing to pay 1 point,they can offer you a lower rate of 6.25% APR for a 30-year fixed rate mortgage.One point is equal to 1% of the loan value.So if you take the lower rate and pay the points you will need to borrow an additional $3250 to cover the point you are paying the lender.Assuming that you do not intend to prepay your mortgage (pay off your mortgage early),are you better off paying the 1 point and borrowing at 6.25% APR or just taking out the loan at 6.5% without any points?

Correct Answer:

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Pay the points!
Points (6.25% APR)
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