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My yearly salary is $ 63,800. Assume you are planning on spending a certain amount of...

My yearly salary is $ 63,800. Assume you are planning on spending a certain amount of income towards a mortgage. if you spend 22% of your monthly salary towards a house, what is the highest price you can afford? what is the highest priced house a high school graduate can afford. Use absolute or relative change statement to compare the house prices of the high school graduate to your house. Assume standard APR is 1.85% for 30 years. Make sure to show at least 1 sample formula that you used in excel to the house price.

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Answer #1

Salary = 63800 pa

Amount spent on mortgage (C) = 22% * 63800 pa = 14036 pa

r: annual rate of interest = 1.85%

Maximum value of mortagage = Sum of present value of all the future cash flows

Maximum value of mortagage = M (assume)

This becomes a GP with a =C/(1 + r) ; r = 1/(1 + r) & n = 30

M = 320,938.11 (maximum value of mortgage the person can buy)

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