a lender estimates the closing costs on a home loan will be 3.75% of the loan amount of $120,000. the actual…

a lender estimates the closing costs on a home loan will be 3.75% of the loan amount of $120,000. the actual closing costs are listed below.\n| closing cost | charge |\n|--|--| \n| loan origination | $300 |\n| title insurance | $600 |\n| attorneys fees | $1,250 |\n| appraisal | $550 |\n| inspection | $525 |\n| recording fees | $125 |\n| escrow | $2,000 |\nevaluate the lenders good faith estimate.\na. the lender made an excellent estimate; it was equal to the actual closing costs.\nb. the lender made a very good estimate; it was within 0.25% of the actual closing costs.\nc. the lender made a fairly good estimate; it was between 0.25% and 0.5% of the actual closing costs.\nd. the lender made a poor estimate; it was off by more than 0.5% of the actual closing costs.

a lender estimates the closing costs on a home loan will be 3.75% of the loan amount of $120,000. the actual closing costs are listed below.\n| closing cost | charge |\n|--|--| \n| loan origination | $300 |\n| title insurance | $600 |\n| attorneys fees | $1,250 |\n| appraisal | $550 |\n| inspection | $525 |\n| recording fees | $125 |\n| escrow | $2,000 |\nevaluate the lenders good faith estimate.\na. the lender made an excellent estimate; it was equal to the actual closing costs.\nb. the lender made a very good estimate; it was within 0.25% of the actual closing costs.\nc. the lender made a fairly good estimate; it was between 0.25% and 0.5% of the actual closing costs.\nd. the lender made a poor estimate; it was off by more than 0.5% of the actual closing costs.

Answer

Explanation:

Step1: Calculate the estimated closing costs

The loan amount is $120000$ and the estimated closing - cost percentage is $3.75%$. So the estimated closing costs $E$ are $E = 120000\times0.0375=$4500$.

Step2: Calculate the actual closing costs

Add up all the actual closing - cost charges: $300 + 600+1250 + 550+525+125+2000=$5350$.

Step3: Calculate the percentage error

The absolute error $|E - A|=|4500 - 5350| = 850$. The percentage error $P$ is $P=\frac{|E - A|}{A}\times100=\frac{850}{5350}\times100\approx15.9%$. Since $15.9%>0.5%$.

Answer:

d. The lender made a poor estimate; it was off by more than 0.5% of the actual closing costs.