Thomas took a new job in Iowa.He is buying his first home.He has qualified for an APR of 4.6%.He plans on making payments for the next 20 years.He anticipates that he can afford a payment of $550.00.How much of a mortgage will Thomas qualify for?

Question

Quizplus · Accepted Answer

To calculate the mortgage amount, we can use the formula: 
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
where, 
M = Mortgage amount
P = Payment per period
i = APR / (12 x 100)  (monthly interest rate)
n = number of payments (in months)

Substituting the given values, we get: 
550 = M [ (0.046/12) (1 + 0.046/12)^240 ] / [ (1 + 0.046/12)^240 - 1 ]

Solving for M, we get: 
M = $86,199.56

Therefore, Thomas will qualify for a mortgage of $86,199. So, the correct choice is C.

Thomas Took a New Job in Iowa