You want to buy a home. You can borrow 95% of the purchase price. Assuming you can make a down payment of $12,000, what price can you pay for the home?
You want to buy a home. You can borrow 95% of the purchase price. Assuming you can make a down payment of $12,000, what price can you pay for the home?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
You want to buy a home. You can borrow 95% of the purchase price. Assuming you can make a down payment of $12,000, what price can you pay for the home?
Expert Solution
Step 1 - Introduction
To calculate the price of home we will use the below formula
Home price = Down payment/(1-Loan to price ratio)
Where
Down payment = $12,000
Loan to price ratio = 95%
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