2. Suppose you have $50,000 annual disposable income and would like to spend 30% of the income on the mortgage payment. 1) Find the highest affordable house price if a 30-year mortgage rate is 6.0%. 2) Due to low interest policy, as of January 10 of 2015, the 30 year mortgage rate was dropped to 3.0%. Find the highest affordable house price. 3) Following time series plots shows the relationship between a 30 year conventional mortgage rate and Case-Shiller home price index from 2000 to 2007. Carefully explain the relationship between mortgage rate and house price for the periods. EDW - . 30-Year Conventional Mortgage Rate (right) S&P/Case-Shiller 20-City Composite Home Price Index (left) 9.6 8.8 8.0 (Continuously Compounded Annual Rate of Change) man (Percent) 5.6 4.8 2000 2001 2002 2003 2004 2005 2006