Question

Peter wants to buy a duplex with a purchase price of $226,950. Peter can afford a 10% down payment. Peter earns $2,985 a month and wants to spend no more than 10% of his income on his mortgage payment. Peter is going to rent out the other half of the duplex. He thinks that if he charges $900 a month in rent this will cover the remainder of his mortgage payment. Given that Peter has a 30 year mortgage with a fixed rate of 6.25%, how should Peter adjust how much he charges for rent of the other half of the duplex?

Answer 1

Peter borrows 226,950*0.9=204255

Assuming the mortgage is compounded monthly, the total monthly mortgage payment is
A=P(i(1+i)^n)/((1+i)^n-1)
where 
A=monthly payment
P=amount borrowed (present value)=204255
i=monthly interest = 0.0625/12
n=number of months = 30*12=360

A=monthly payment
=P(i(1+i)^n)/((1+i)^n-1)
=204255(.0625/12(1+.0625/12)^360)/((1+.0625)^360-1)
=1257.63

His monthly payment
=10% of income
=10% of $2985
=298.50

So minimum rent = 1257.63-298.50 = $959.13

Answer 2

Answer:

the answer is b

Step-by-step explanation: