Question

A company negotiated a mortgage from a bank in order to acquire a land. Mortgage payments...

A company negotiated a mortgage from a bank in order to acquire a land. Mortgage payments are $15,500 made every month for 7 years. The first payment to bank will be made now. If the annual interest rate is 3.45% and compounding is monthly, calculate the maximum price of the land which the company can buy using only this mortgage.

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Answer #2

We are given the following information about an annuity due because the first payment is being made today:

Monthly payment PMT 15500
rate of interest r 3.45%
number of years n 7
Monthly Compounding frequency 12
Present value PV To be calculated

We need to solve the following equation to arrive at the required PV


So the PV is $1158564.61, this is the maximum price of land he can pay with this mortgage

answered by: anonymous
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