Over the past 40 years, interest rates have varied widely. The rate for a 30-year...
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Over the past 40 years, interest rates have varied widely. The rate for a 30-year mortgage reached a high of 14.75% in July 1984, and it reached 4.64% in October 2010. A significant impact of lower interest rates on society is that they enable more people to afford the purchase of a home. In the following exercise, we consider the purchase of a home that sells for $125,000. Assume that we can make a down payment of $25,000, so we need to borrow $100,000. We assume that our annual income is $35,000 and that we have no other debt. Assume that property taxes plus insurance total $250 per month.
If we can afford to pay a monthly amount of $566.67, determine how much we can borrow if the term is 30 years and the interest rate is 4.64%. (Round your answer to the nearest dollar.)
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