asked 74.5k views
4 votes
Adrian is looking to take out a 15-year mortgage from a bank offering a monthly interest rate of 0.25% Using the formula below, determine the maximum amount Adrian can borrow, to the nearest dollar, if the highest monthly payment he can afford is $4,225

asked
User KTY
by
8.4k points

1 Answer

3 votes

Answer: To determine the maximum amount Adrian can borrow for a 15-year mortgage with a monthly interest rate of 0.25% and a maximum monthly payment of $4,225, we can use the loan amortization formula:

Loan Amount = Monthly Payment / ((Monthly Interest Rate) * (1 + (1 + Monthly Interest Rate)^(-Number of Months)))

Let's calculate the loan amount:

Monthly Payment = $4,225

Monthly Interest Rate = 0.25% = 0.0025

Number of Months = 15 years * 12 months/year = 180 months

Loan Amount = $4,225 / ((0.0025) * (1 + (1 + 0.0025)^(-180)))

Calculating the loan amount:

Loan Amount ≈ $4,225 / (0.0025 * (1 + (1.0025)^(-180)))

Loan Amount ≈ $4,225 / (0.0025 * (1 + 0.082331))

Loan Amount ≈ $4,225 / (0.0025 * 1.082331)

Loan Amount ≈ $4,225 / 0.002705828275

Loan Amount ≈ $1,560,808.87

Therefore, to the nearest dollar, the maximum amount Adrian can borrow is approximately $1,560,809.

answered
User LukyVj
by
9.2k points
Welcome to Qamnty — a place to ask, share, and grow together. Join our community and get real answers from real people.