Answer to Question #318609 in Financial Math for DRJ

Question

You would like to buy a house, but you can only afford monthly payments of R500. Thirty-year loans are available at 6% interest compounded monthly. If you can make a R5 000 down payment, what is the price of the most expensive house that you can afford to purchase?

Answer 1

let's find an annuity

$\frac{0.06}{12}=0.005$

$FV=500(\frac{1+0.005)^{360}-1}{0.005})=502257.52$

the price of the most expensive house that you can afford to purchase:

502257.82+5000=507257.52