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You can afford a $900 per month mortgage payment. You've found a 30 year loan at 7.7% interest.
a) How big of a loan can you afford? (Round to the nearest cent, as needed.)
b) How much total money will you pay the loan company? (Round to the nearest cent, as needed.)
c) How much of that money is interest? (Round to the nearest cent, as needed.)
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Use the formula for the monthly payment for a loan
M =
where L is the loan amount; r = is the effective interest rate per month;
n is the number of payments (same as the number of months); M is the monthly payment.
From this formula, the expression for the maximum loan is
L = .
In this problem M = $900; r = , n = 30*12 = 360 monthly payments.
Substitute these values into the formula and get for the maximum loan amount
L = = $126,234.26.
Maximum loan you can afford is $126,234.26. <<<---=== It is the ANSWER to (a).
You will pay to the loan company 360*$900 =$324,000. <<<---=== It is the ANSWER to (b).
It is the monthly payment of $900 taken 360 times.
The interest is the difference between (a) and (b)
$324,000 - $126,234.26 = $197,765.74. <<<---=== It is the ANSWER to (c).
Solved.