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Your lender now offers you a 30-year fixed-rate mortgage with 3.6% interest rate per year. If...

Your lender now offers you a 30-year fixed-rate mortgage with 3.6% interest rate per year. If you can afford a monthly payment of $1725, what is the maximum loan you can get? (round to nearest dollar.)

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Expert Solution

Time Period = 30 years = (30*12) = 360 Payments
Monthly Payment = $1725
Interest Rate = 3.6% per year = (3.6/12)% = 0.3%per month
Maximum Loan = Present Value of all onthly Payments
Maximum Loan = $ 1725 * PVAF(0.3%,360 months)
Maximum Loan = $ 1725 * [1- (1+0.003)^-360] /0.003
Maximum Loan = $ 1725 * 219.9517
Maximum Loan = $ 379,417
Present Value of Annuity = P[1- (1+i)^-(n)] / i

jeff jeffy answered 2 years ago
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