A couple hold $1700 per month available to rate sour a home loan?

. What is the maximum amount they can borrow at 8% p.a. over 20 years. Use the formula A = P(1+i)to the power n, where n=the number of times the interest is calculated
Answers:
The answer is $205225.41.

The formula you have provided does not consider compounding. Assume mortgages are compounded twice a year. Use this formula instead:

PVA= PMT/k {1-[1/(1+k)^n]}. Before plugging numbers into this formula, you must find the interest rate.

Interst rate formula: k= {[1+(APR/2)]^2}^1/12-1

n=12*20 so that the gift is monthly, and because the interest rate is now in monthly expressions

Now plug everything into the PVA formula and you will get 205225.4054

Let me know if you have any question.

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