Over the past 40 years, interest rates have varied widely. The rate for a 30-yea

Question

Over the past 40 years, interest rates have varied widely. The rate for a 30-year mortgage reached a high of 14.75% in July 1984, and it reached 4.64% in October 2010. A significant impact of lower interest rates on society is that they enable more people to afford the purchase of a home. In the following exercise, we consider the purchase of a home that sells for $125,000. Assume that we can make a down payment of $25,000, so we need to borrow $100,000. We assume that our annual income is $43,000 and that we have no other debt. Assume that property taxes plus insurance total $250 per month.

What is the difference in the amount we can borrow between the high and low rates mentioned above? (Round your answer to the nearest dollar.)

THE ANSWER IS NOT: $93658 OR $93662 OR $842 OR $93657

Explanation / Answer

Given, the higher interest rate is = 14.75%

And, the lower interest rate is = 4.64%

And, we need to borrow = $100,000.

Therefore, the difference in the amount we can borrow between the high and low rates is =

$[100000*(14.75-4.64)/100] = $[100000*10.11/100] = $10110 per year.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.