A landlord needs to update a rental house due to it's age, so it can be habitable aga

Question

A landlord needs to update a rental house due to it's age, so it can be habitable again. If he has that ability to cover a $1,600.00 payment monthly for 3 years at 3% compounded monthly, how much can he borrow and still be able to afford the payment?

Answer 1

This is an example of finding the present value of an annuity. Here the monthly payment (p) is $1,600, effective monthly rate (r) is 3%/12 = 0.25% and time period in months (n) is 3*12=36.

The formula for the present value of these payments (and hence the borrowing) = p * (1/r - 1/r(1+r)^n) = $55,018