Question

Pete's monthly housing budget is $2,250. His monthly costs are $215.75 for insurance, $143.50 for utilities, and $273 for taxes. Which of these houses has the highest monthly payment he can afford?

A.
house A; monthly payment of $1,327.18
B.
house B; monthly payment of $1,550.89
C.
house C; monthly payment of $1,790.25
D.
house D; monthly payment of $1,989.23

Answer 1

Option B. house B; monthly payment of $1,550.89 is the correct answer.

Explanation:

In order to calculate the highest payment Pete can afford we have to subtract his expenses from his housing budget.

Given

Total housing budget = $2250

Monthly costs = $215.75

Utilities = $143.50

Taxes = $273

First all expenses can be added together to subtract from the housing budget.

So

`Monthly\ costs = Insurance\ +\ Utilities\ +\ taxes\\ = \$215.75 + \$143.50 + \$273\\= \$632.25`

Now the total monthly cost will be subtracted from housing budget.

`Amount\ for\ monthly\ payment = Housing\ budget - Monthly\ Expenses\\=\$2250\ -\ \$632.25\\=\$1617.75`

Hence, he saves $1617.75 for monthly payment.

Looking at the options, C and D will be ruled out as both the quantities are greater than 1617.75

Option A and B both are smaller than 1617.75 but as $1,550.89>$1,327.18, Option B is the highest monthly payment Pete can afford.

Hence,

Option B. house B; monthly payment of $1,550.89 is the correct answer.