RatedrillHow much you can borrow
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
Your budget allows a monthly mortgage payment of $800. At 4.25% APR for 30 years, what is the largest loan you can take?
What this problem teaches
The formula: PV = PMT × (1 - (1 + i)^-n) / i. Set P/Y = C/Y = 1, so I/Y is the rate per period. Cash you pay out is negative and cash you receive is positive.
A hint if you get stuck
The loan you can afford is the present value of the payments: PV = PMT × (1 - (1 + i)^-n) / i.
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