Answer to Question #228377 in Financial Math for Juan

Question

How much could the Johnsons borrow today if they were willing to have a $1,800 monthly mortgage payment? (Assume that the interest rate and the length of the loan remain the same.)

Answer 1

M = P [ i(1 + i)ⁿ ] / [ (1 + i)ⁿ– 1]

P = principal loan amount

i = monthly interest rate

n = number of months required to repay the loan

M= monthly mortgage payment.

Therefore,

1800=P [ i(1 + i)ⁿ ] / [ (1 + i)ⁿ – 1]

P= 1800× [ (1 + i)ⁿ – 1] / [ i(1 + i)ⁿ ]

since we are not given i and n