Which of the following statements regarding the break-even point for paying discount points in order to get a lower interest rate on the loan is correct?
A. All else equal, the break-even point for paying points on an original mortgage is longer than the break-even point for paying points on a refinance.
B. All else equal, the break-even point for a taxpayer paying points on an original mortgage is longer when the taxpayer's marginal income tax rate increases in the years subsequent to the original financing compared to a taxpayer whose marginal tax rate does not change in the years subsequent to the year in which the loan is executed.
C. All else equal, the break-even point for paying points on an original mortgage is longer for a taxpayer who does not make extra principal payments each year on the loan than for a taxpayer who does make additional principal payments each year on the loan.
D. None of the choices are correct.
Answer: B
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