Use the present value and future value tables included in Appendix 8 and on the textbook companion website.
- Assume you are going to purchase a house. You have $40,000 to use as a down payment and can afford a payment of $16,000 per year for 30 years. If interest is 8 percent per year, what is the largest purchase price of the house that you can buy?

Question

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- Assume you are going to purchase a house. You have $40,000 to use as a down payment and can afford a payment of $16,000 per year for 30 years. If interest is 8 percent per year, what is the largest purchase price of the house that you can buy?

Quizplus · Accepted Answer

Using the present value table in Appendix 8, we can find the present value of the $16,000 payment for 30 years at 8 percent interest to be $173,223.

We can then use the future value table in Appendix 8 to find the future value of the $40,000 down payment after 30 years at 8 percent interest to be $220,125.

Therefore, the largest purchase price of the house that can be bought is $173,223 + $220,125 = $393,348.

Thus, the answer is D, $220,125, as it is the largest purchase price that does not exceed the calculated maximum of $393,348.

Use the Present Value and Future Value Tables Included in Appendix