Answer:
$47,039
Step-by-step explanation:
The time-value-of-money (TVM) functions of a calculator or spreadsheet can be used to find the present value of a series of $600 payments, discounted at 5.2% compounded monthly. (See the attachment for an example.) The present value is found to be about $47,039.
The owner can afford to borrow up to $47,039.
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This can be figured "by hand" using the amortization formula.
A = P(r/12)/(1 -(1 +r/12)^(-12·t))
A is the payment on a loan of principal P at annual rate r for t years, compounded monthly.
Solving for P, we have ...
P = 12A(1 -(1 +r/12)^(-12t))/r = 12·600(1 -(1 +0.052/12)^-96)/0.052
P ≈ 47039.0653
The owner can borrow up to $47,039.
