you can afford a 1400$ per month mortage payment. youve found a 30 year loan at a...

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youcan afford a 1400$ per month mortage payment. youve found a 30 yearloan at a 6% interest.

youcan afford a 1400 per month mortage payment. you found a 30 yearloan at 6% interest.

a) how big of a loan can you afford?

b) how much total money will you pay the loan company?

c) how much of that money is interest?

Answer & Explanation Solved by verified expert

3.6 Ratings (459 Votes)

a)	$ 2,33,508

Working:

Loan amount is the present value of monthly payment.

Present value of annuity of 1		=	(1-(1+i)^-n)/i			Where,
		=	(1-(1+0.005)^-360)/0.005			i	6%/12	=	0.005
		=	166.7916144			n	30*12	=	360

Loan amount		=	Monthly payment		*	Present value of annuity of 1
		=	$ 1,400		*	166.7916
		=	$ 2,33,508

b)	$ 5,04,000

Working;

Total payment on the loan		=	Monthly payment	*	Number of months
		=	$ 1,400	*	360
		=	$ 5,04,000

c)	$ 2,70,492

Working:

Interest		=	Total repayment	-	Amount borrowed
		=	$ 5,04,000	-	$ 2,33,508
		=	$ 2,70,492

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Transcribed Image Text

youcan afford a 1400$ per month mortage payment. youve found a 30 yearloan at a 6% interest.youcan afford a 1400 per month mortage payment. you found a 30 yearloan at 6% interest.a) how big of a loan can you afford?b) how much total money will you pay the loan company?c) how much of that money is interest?