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What is the most you can lend to a borrower

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Reference no: EM132986645

Question - You are working for a bank that is issuing 30-year mortgages. To meet your cost of capital, you need to price these mortgages using an interest rate (stated as an effective annual rate) of 7%.

What is the most you can lend to a borrower who can only afford to pay $1,800 per month? (The first payment is made one period after the mortgage is issued, the standard assumption.)

Reference no: EM132986645

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