This is for math 125

Question

What is the maximum loan(p) YOU can take out if you can afford $3,800 quarterly Payment for 15

years at 2.5%

Answer 1

Can think of it as the amount you'd have in a savings account if you paid $3,800 4 times a year for 15 yrs at rate rate of 2.5%. A = PMT[(1 + APR/n)^(nY) - 1] / APR/n.

A = 3800[(1 + 0.025/4)⁶⁰ - 1] / 0.025/4 -> 3800(0.45329) / 0.00625 ≈ $275,600.

Get the same answer if use PMT form and solve for A in the last step.

PMT = A(APR/n) / [(1 + APR/n)^(nY) - 1]

3800 = A(0.025/4) / [1 + 0.025/4)⁶⁰ - 1]

3800 = A(0.00625) / [1.00625⁶⁰ - 1] -> A(0.00625) / 0.45329

3800 = 0.01379A A ≈ $275,562 (One of us is correct !!??)