Question 1206600
you can afford to pay at most 2650 per month.
maximum amortization period is 20 years.
payment is 6% per year compounded annually.


i used the texas instruments business analyst 2 calculator.


inputs are:
present value = 0
future value = 0
payment at the end of each time period = 2650
number of time periods = 20 years * 12 months per year = 240 months.
interest rate per time period = 1.06 ^ (1/12) = 1.004867551 per month, minus 1 = .004867551 per month, * 100 = .4867551% per month.


calculator says that the present value of the loan is equal to 374668.4188.


that's the most expensive house you can guy with the amount of money that you have available.


the total interest that will be paid to the owner by the end of the loan period is equal to 240 * 2650 = 636000 minus 374668.4188 = 261331.5812.


that should be your answer.


note that the 6% per year is compounded annually.
this is different than if it was compounded monthly.


if it was compounded monthly, then the monthly interest rate would be 6% / 12 = .5% per month.


the effective annual interest rate would then be 1.005^12 = 1.061677812, minus 1 = .061677812, * 100 = 6.1677812% per year.


since it is compounded annually, then the monthly interest rate would 1.06 ^ 1/12 = 1.004867551, minus 1 = .004867551, * 100 = .4867551% per month.


the effective annual interest rate would then be 1.004867551 ^ 12 = 1.06, minus 1 = .06, * 100 = 6%.


that makes a difference, so please check to make sure they wanted the 6% to be  compounded annually, rather than monthly.


if they wanted it compounded monthly, then this answer is incorrect.


i verified with excel that the answer provided here is correct if annual compounding of the interest rate is assumed.