Results 1 to 2 of 2

Math Help - interest problems

  1. #1
    Newbie
    Joined
    May 2008
    Posts
    3

    interest problems

    Hey, I need help answering some problems I have


    James is buying a house on a 30 year conventional mortgage at 6.25% APR. He will put 3% down on the loan. If he wants to keep his monthly payments at or below $1,000, how much is the most expensive house James can buy?

    Thanks
    Follow Math Help Forum on Facebook and Google+

  2. #2
    Super Member

    Joined
    May 2006
    From
    Lexington, MA (USA)
    Posts
    11,867
    Thanks
    745
    Hello, mandy!

    James is buying a house on a 30-year conventional mortgage at 6.25% APR.
    He will put 3% down on the loan.
    If he wants to keep his monthly payments at or below $1,000,
    how much is the most expensive house James can buy?

    The amortization formula is: . P \;=\;A\,\frac{(1+i)^n - 1}{i(1+i)^n}

    . . where: . \begin{Bmatrix}P &=& \text{principal amount of the loan} \\ A &=& \text{periodic payment} \\ i &=& \text{periodic interest rate} \\ n &=&\text{number of periods} \end{Bmatrix}


    We have: . A = 1000,\;i = \frac{0.0625}{12},\;n = 360

    Then: . P \;=\;1000\,\frac{\left(1+\frac{0.0625}{12}\right)^  {360}-1}{\frac{0.0625}{12}\left(1 + \frac{0.0625}{12}\right)^{360}} \;\approx\; \$162,412.22

    This is the maximum amount he can borrow,
    . . which is 97% of the price of the house.


    Therefore, he can buy a house up to: . \frac{\$162,412.22}{0.97} \;\approx\;\$167,435.28

    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Calculate interest rate based on interest in parcels
    Posted in the Business Math Forum
    Replies: 1
    Last Post: February 17th 2011, 10:38 PM
  2. Replies: 3
    Last Post: December 14th 2009, 08:25 PM
  3. word problems (compound interest related)
    Posted in the Pre-Calculus Forum
    Replies: 2
    Last Post: April 15th 2009, 06:59 PM
  4. Replies: 0
    Last Post: January 20th 2009, 07:20 PM
  5. Interest Problems
    Posted in the Business Math Forum
    Replies: 1
    Last Post: May 28th 2008, 02:46 PM

Search Tags


/mathhelpforum @mathhelpforum