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

6. Your lender now offers you a 30-year-fixed rate home mortgage with 3.6% interest rate per year. If you can afford a monthly payment of $1510, what is the maximum loan you can get?

7. What is the present value of $3190 paid at the end of each of the next 50 years if the interest rate is 7% per year?

Solutions

Expert Solution

Q6:

We need to find present value of annuity

Where PV=present value; C= annuity payments ; i= interest rate and n= no of terms

PV= [1510*[1-(1+.036)^-30]/.036] =27427.28 --- maximum loan that we can get

Q7:

We need to find present value of annuity using same formula above

PV=[3190*[1-(1+.07)^-50]/.07] =44024.38

jeff jeffy answered 2 years ago
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