Question

you can afford a 1400$ per month mortage payment. youve found a 30 year loan at a 6% interest.

you can afford a 1400 per month mortage payment. you found a 30 year loan at 6% interest.

a) how big of a loan can you afford?

b) how much total money will you pay the loan company?

c) how much of that money is interest?

Answer 1

a)	$ 2,33,508
Working:
Loan amount is the present value of monthly payment.
Present value of annuity of 1			=	(1-(1+i)^-n)/i			Where,
			=	(1-(1+0.005)^-360)/0.005			i	6%/12	=	0.005
			=	166.7916144			n	30*12	=	360
Loan amount			=	Monthly payment		*	Present value of annuity of 1
			=	$             1,400		*	166.7916
			=	$       2,33,508
b)	$ 5,04,000
Working;
Total payment on the loan			=	Monthly payment	*	Number of months
			=	$             1,400	*	360
			=	$       5,04,000
c)	$ 2,70,492
Working:
Interest			=	Total repayment	-	Amount borrowed
			=	$       5,04,000	-	$ 2,33,508
			=	$       2,70,492