Max is thinking about purchasing a house. He wishes his annual payments to be 25% of...

Max is thinking about purchasing a house. He wishes his annual payments to be 25% of his salary. The following table lists his expected salary over the next 30 years. How much is Max willing to borrow for his house? Assume he can find a loan that matches his desired payments. Assume the interest rate is 6.58%.

Years	Salary
1 -10	$37,823
11-20	$97,337
21-30	$185,750

Expert Solution

Year	PV factor	Salary	Loan payment
1	0.9383	37,823.00	9,455.75
2	0.8803	37,823.00	9,455.75
3	0.8260	37,823.00	9,455.75
4	0.7750	37,823.00	9,455.75
5	0.7271	37,823.00	9,455.75
6	0.6823	37,823.00	9,455.75
7	0.6401	37,823.00	9,455.75
8	0.6006	37,823.00	9,455.75
9	0.5635	37,823.00	9,455.75
10	0.5287	37,823.00	9,455.75
11	0.4961	97,337.00	24,334.25
12	0.4655	97,337.00	24,334.25
13	0.4367	97,337.00	24,334.25
14	0.4098	97,337.00	24,334.25
15	0.3845	97,337.00	24,334.25
16	0.3607	97,337.00	24,334.25
17	0.3385	97,337.00	24,334.25
18	0.3176	97,337.00	24,334.25
19	0.2980	97,337.00	24,334.25
20	0.2796	97,337.00	24,334.25
21	0.2623	185,750.00	46,437.50
22	0.2461	185,750.00	46,437.50
23	0.2309	185,750.00	46,437.50
24	0.2167	185,750.00	46,437.50
25	0.2033	185,750.00	46,437.50
26	0.1907	185,750.00	46,437.50
27	0.1790	185,750.00	46,437.50
28	0.1679	185,750.00	46,437.50
29	0.1575	185,750.00	46,437.50
30	0.1478	185,750.00	46,437.50

	12.9511		802,275.0000

So Max loan as per his repayment schedule he can avail is 802,275

ekkarill92 answered 3 years ago

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