Question

In: Finance

Consider a 15 year mortgage with a 3% APR interest rate and a 20% down payment...

Consider a 15 year mortgage with a 3% APR interest rate and a 20% down payment if you can afford a $1500 monthly payment, how expensive a house can you buy?

a. $254,250

b. $217,208

c. $271,510

d. $298,402

Solutions

Expert Solution

Ans c. $271,510

P = Regular Payments
PV = Loan Amount
r = rate of interest
n = no of periods
P = r (PV)
1 - (1 + r )^-n
1500 = (3%/12)*PV
1 - (1 / (1 + 3%/12)^180))
1500 = 0.0025 * PV
0.362013678642485
PV = 1500 / 0.0025 * 0.362013678642485
PV = 217208.21
Total Cost = Loan / (1 - Downpayment)
217208.21/ (1 - 20%)
271510

jeff jeffy answered 3 years ago
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