You'd like to know how much you can borrow from the bank using a 30 year principal and interest (P&I) home loan. You can afford monthly payments of $9,200. The interest rate is 5.04% pa compounding monthly which is not expected to change. How much can you borrow now?
【General guidance】The answer provided below has been developed in a clear step by step manner.Step1/2Based on the given information, you can afford to make monthly payments of $9,200 towards a 30 year P&I home loan. The interest rate on the loan is 5.04% per annum and it compounds monthly.Using this information, we can calculate the amount you can borrow using a formula known as the present value formula. This formula calculates the present value of a future stream of payments based on a given interest rate and time period.Explanation:Assuming that the loan payments are made at the end of each month, the present value formula can be used to calculate the maximum loan amount as follows:Loan amount = (monthly payment / discount factor)Explanation:Please refer to solution in this step.Step2/2where the discount factor is calculated as follows: ... See the full answer