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

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Finance

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?

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