You want to purchase a house: your maximum monthly payment is $2,500, and you also have a saving of $150,000 as the down payment. You apply for a 30-year fixed mortgage loan with APR 4.99%. What is the maximum house price you can afford to buy?

2. Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $300,000 at age 65, the firm will pay the retiring professor $1,800 a month until death. If the professor's remaining life expectancy is 25 years, what is the monthly rate on this annuity? What is the effective annual rate?

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To determine the maximum house price you can afford we need to consider the down payment and the mon... View the full answer