Penny and Ernest want to purchase a new home for $250,000. Their combined income is $68,000, and they will make a down payment of $80,000. Taxes on the house are $1,800 per year and the heating cost is $1,300 annually. The house includes condo fees of $500. The couples other debt payments are $623 per month for their car loan and their student loan. In order to keep payments low, the mortgage will be amortized over 25 years. The interest rate on a 5-year mortgage term is 1.93%.

1) Referring to question 4, what is Penny and Ernest's gross debt service ratio (GDS)? Select one: a. 19.83% b. 31.39% c. 18.50% d. 21.57% e. 24.02%

2) Referring to question 4, assume Penny and Ernest lose this deal and want to know the maximum amount of money they can borrow. If the bank's maximum TDS is 40%, what is the largest payment they can handle? Hint: Determine the maximum monthly mortgage payment using the TDS formula and the information provided in question 4.

Select one:

a.$1,380.66

b.$1,068.66

c.$1,374.35

d.$1,135.33

e.$802.00

Referring to questions 4 and 6, what would be the amount of the mortgage if they decide to make the maximum mortgage payment?

Select one:

a.$327,163.04

b.$254,393.75

c.$329,777.61

d.$190,915.53

e.$167,028.59