The total monthly payment for a home mortgage loan is affected by the property tax and insurance. This amount is around 15% of the principal plus interest payment that you calculated in the previous problem. Moreover, as a rule of thumb, a family should not devote more than 28% of its gross income for home loan payments. With this information, find the amount that a family must earn to afford a $200,000 mortgage loan using the APRs of the previous problem. Table P7.2 should help you in your computations.

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TABLE P7.2 Worksheet for Problem 10 A B C E Monthly Total Payment payment APR (From previous problem) (1.15 x Annual Payment (12 x Minimum Annual Income Column B) Column C) (Column D/12) 0% 4% 8% 12% 16%