A consumer is shopping for a home. His budget will support a monthly payment of $1,300 on a 30-year mortgage with an annual interest rate of 7.2 percent. If the consumer puts a 10 percent down payment on the home, the most he can pay for his new home is closest to: A. $191,518. B. $210,840. C. $212,800. The answer is C. I have no trouble calculating the PV (PMT = 1300, I/Y = .6, N = 360, FV = 0) which is 191,518. However, the answer then takes the PV/(1-.10) to arrive at answer C. I think I’m misunderstanding the question; so any thoughts here?
Mortgage + 10% × house value = house value.
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