Question

You can afford a $950 per month mortgage payment. You've 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)
	Present Value Of An Annuity
	= C*[1-(1+i)^-n]/i]
	Where,
	C= Cash Flow per period
	i = interest rate per period =6%/12 =0.5%
	n=number of period =300*12 =360
	= $950[ 1-(1+0.005)^-360 /0.005]
	= $950[ 1-(1.005)^-360 /0.005]
	= $950[ (0.834) ] /0.005
	= $1,58,452.03
	Loan can be afford = $158452.03
b)	Money will pay = $950*30*12
	=$342000
C)	Interest amunt = $342000-158452.03
	=$342000-158452.03
	=$183547.97