Question

Wyatt can afford a $1290-per-month house loan payment. If he is being offered a 30-year house loan with an APR of 7.2%, compounded monthly, which of these expressions represents the most money he can borrow?

Answer 1

($1290)((1+0.006)^360-1)

___________________

(0.006)(1+0.006)^360

Explanation:

Answer 2

The most money he can borrow : $ 17916.67

Explanation:

Formula for Monthly Payment is given by :

`P=(r* PV)/(1-(1+r)^(-n))`

P : Monthly Payment = $1290

r : Rate per period = 7.2%

n : Number of periods = 360

To be calculated : PV : Present Value

Now, Substituting values in the formula :

`1290=((7.2)/(100)* PV)/(1-(1+(7.2)/(100))^(-360))\\\\PV=(1290* (1-(1.072)^(-360)))/(0.072)\\\\\bf\implies PV=\$17916.67`

So, the most money he can borrow : $ 17916.67