You are applying for a loan to purchase a shopping center. You can afford no more than $23,425, monthly (PMT). The lender informs you that interest rates are at 6.25% (RATE) and typical loan amortization periods are 25 years (NPER). What is the most you can borrow (PV)? 

To determine the maximum amount you can borrow (PV), we can use the formula for the present value of an ordinary annuity, which is commonly used in loan calculations:

\[
PV = \frac{PMT \times \left(1 - (1 + \frac{RATE}{12})^{-NPER \times 12}\right)}{\frac{RATE}{12}}
\]

Where:
- $PMT = 23,425$ (monthly payment)
- $RATE = 6.25\%$ (annual interest rate)
- $NPER = 25$ (loan amortization period in years)

First, we convert the annual interest rate to a monthly rate by dividing by 12, and the number of periods by multiplying the number of years by 12.

Let's calculate it.

The most you can borrow, given the conditions, is approximately \$3,551,021.

Would you like more details or have any questions? Here are 5 related questions that may interest you:

1. How would the loan amount change with a different interest rate?
2. What if the loan term was 30 years instead of 25 years?
3. How does compounding frequency affect the loan amount?
4. What impact does making an additional lump-sum payment have on the loan?
5. How can I calculate the total interest paid over the loan term?

**Tip:** Always double-check the terms of your loan to understand how interest is compounded and what fees might apply.

You are applying for a loan to purchase a shopping center. You can afford no more than $23,425, monthly (PMT). The lender informs you that interest rates are at 6.25% (RATE) and typical loan amortization periods are 25 years (NPER). What is the most you can borrow (PV)?

Discover how to calculate the maximum amount you can borrow for a loan with a monthly payment of $23,425, a 6.25% annual interest rate, and a 25-year amortization period. Learn about the present value of an ordinary annuity formula used in loan amortization calculations.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation