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 |
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