Question

PJ can afford an $800 monthly mortgage payment. If the current mortgage rates are 4.75% and he wishes to have a 30-year mortgage, what is the maximum amount he can afford to borrow? Round your answer to the nearest dollar.

Answer 1

Hi there

Use the formula of the present value of annuity ordinary
The formula is
Pv=pmt [(1-(1+r/k)^(-kn))÷(r/k)]
Pv present value?
PMT payment per month 800
R interest rate 0.0475
K compounded monthly 12
N time 30 years

Pv=800×((1−(1+0.0475÷12)^(
−12×30))÷(0.0475÷12))
=153,360.32....answer

Hope it helps