SOLUTION: Please help me solve this Suppose you can afford to pay at most $600 per month for a mortgage payment. If the maximum amortization period you can get is 25 years, and you must p

Question 1206632: Please help me solve this
Suppose you can afford to pay at most $600 per month for a mortgage payment. If the maximum amortization period you can get is 25 years, and you must pay 6.5% interest per year compounded annually, what is the most expensive house you can buy? How much interest will you have paid to the lender at the end of the loan?
What is the monthly interest rate corresponding to the effective annual rate?

What is the price of the most expensive house you can buy?
What is the total interest paid?
Answer by ikleyn(52754)   (Show Source): You can put this solution on YOUR website!
.
Please help me solve this
Suppose you can afford to pay at most $600 per month for a mortgage payment.
If the maximum amortization period you can get is 25 years,
and you must pay 6.5% interest per year compounded ,
(a) what is the most expensive house you can buy?
(b) How much interest will you have paid to the lender at the end of the loan?
(c) What is the monthly interest rate corresponding to the effective annual rate?
(d) What is the price of the most expensive house you can buy?
(e) What is the total interest paid?
~~~~~~~~~~~~~~~~~~~~~~~~~~~

Usually, mortgages are paid monthly (not annually), and the payments are also
compounded monthly, not annually.

In accordance with this practice, theoretical formulas are also developed
for classical case monthly payments, that are compounded monthly.

So, regularly, the payment and compounding time moments are consistent.

Thus, the regular/traditional payment/compounding scheme is different from that described in your post.

Therefore, reading your post, I think that no one competent professor in a healthy mind
and no one textbook will formulate a problem in a way as it is given in this post.

Now my question is :   who generates defective problems ?

        - Your textbook ?

        - Your professor ?

        - You on your own, by creating them on your knee in the garage?

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