You find that the going rate for a home mortgage with a term of 30 years is 7.6% APR. If your largest monthly payment is $800, how much can you borrow?

Question

Quizplus · Accepted Answer

Using the formula for monthly mortgage payment:
P = (A/i) * ((1+i)^n / ((1+i)^n - 1))
where P = monthly payment, A = amount borrowed, i = interest rate per month (APR divided by 12), and n = total number of payments (30 years x 12 months = 360)
Rearranging the formula to solve for A:
A = P * ((1+i)^n -1) / ((1+i)^n * i)
Plugging in the given values:
i = 0.076/12 = 0.00633
n = 360
P = 800
A = 800 * ((1+0.00633)^360 - 1) / ((1+0.00633)^360 * 0.00633) = $113,302.45 (rounded to the nearest cent)
Therefore, the best choice is B.

You Find That the Going Rate for a Home Mortgage