Question

Your best friend's parents want to buy a home in the Worcester County, but they don’t know the exact amount of money that they can afford to borrow. They can afford monthly payments of $ 1,800. A friendly bank in Worcester has indicated that they can borrow money at 6% fixed rate for 30 years with monthly payments. They can afford to borrow:

Answer 1

Using a mortgage calculator or present value formula with the provided monthly payments of $1,800, a 6% interest rate, and a 30-year term, one can calculate the maximum loan amount your best friend's parents can afford in Worcester.

Step-by-step explanation:

To determine how much money your best friend's parents can afford to borrow from a bank in Worcester, we need to calculate the maximum loan amount based on the monthly payments, interest rate, and loan term provided. They can afford monthly payments of $1,800 at a 6% fixed interest rate for 30 years. Using a mortgage calculator or a present value formula, we can find the maximum loan they are eligible for. The calculation involves analyzing the total cost of the loan, including both the principal and interest over the full loan term. It is important to remember that the actual loan amount might also depend on other factors, such as credit score, existing debts, and lenders' specific requirements.

Answer 2

Answer: They can afford to borrow: $300225.

Explanation: We must use the annuity formula in which the monthly interest rate is 0.06 / 12 = 0.005, the payment is 1800, and the n is equal to (12x30 = 360) which are the number of months in 30 years.

1800 ×
`((1+0,005)^(360)-1 )/((1+0,005)^(360) . 0,005 )` = $300225.