Question

given the following information, determine the maximum loan amount of the canadian mortgage: maximum GDS ratio is 32%, annual gross family income $78,000 estimated monthly real estate taxes $200, anticipated interest rate on the mortgage loan: $7.5%: mortgage maturity: 25 years, non mortgage debt payment: $600.

A. $256,986.86

B. $174,969.78

C. $254,400.87

D.$173,209.10

Answer #1

Monthly GDS = 78000/12 * 32% = 2080

Mortgage payment allowed = 2080 - 200 - 600 = 1280

Maximum loan is:

a | Present value of annuity= |
P* [ [1-
(1+r)^{-n}
]/r ] |
||

P= | Periodic payment | 1,280.00 | ||

r= | Rate of interest per period | |||

Annual interest | 7.50% | |||

Number of payments per year | 12 | |||

Interest rate per period | 0.075/12= | |||

Interest rate per period | 0.625% | |||

n= | number of periods: | |||

Number of years | 25 | |||

Periods per year | 12 | |||

number of payments | 300 | |||

Present value of annuity= | 1280* [ (1- (1+0.00625)^-300)/0.00625 ] | |||

Present value of annuity= | 173,209.10 |

Answer is 173,209.10

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