Time value of money question - PV
Ms. Clara Johnson is buying a house. She expects her budget to allow a monthly payment of $1500 on a 25-year mortgage with an annual interest rate of 6.8 percent. If Johnson makes a 10 percent down payment, the most she can pay for the house is closest to:
A) $216,116. B) $240,129. C) $264,706.
The way the professor solved this:
B is correct. The consumer’s budget will support a monthly payment of 1,500.
Given a 25 year mortgage at 6.8percent, the loan amount will be $216,115.8.This is obtained by entering the following values :
N = 300,I= 6.8/12,PMT = 1,500,CPT PV.If she makes a 10% down payment –> 240,129.
Anyone else notice something wrong with the math?