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Assume that your monthly nominal take-home pay is initially $4200 per month, you can afford to spend 30% of your income on house payments, and

Assume that your monthly nominal take-home pay is initially $4200 per month, you can afford to spend 30% of your income on house payments, and that real AR interest rates are =0.04. The mortgage is financed with 30 years of constant nominal monthly payments. Ignore the effects of taxes. Find the maximal house price that you could afford if: (a) f = 0, (b) f = 0.04, (c) f= 0.06.

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