Question 3: Suppose a single man has $120.000 in student loan debt. payable on the 20 year plan at 5% per year with monthly payments of $791.95. He also makes a car payment of $310 per month and total credit card payments of $132 per month. His annual income is $34,000. Interest rates are at 6.5% for a 30 year LPM (factor = .006321). lenders require a down payment of 5%, PMI costs .7896 of the OLE. Insurance and taxes amount to 3.2% of the home value annually. Using a front ratio of 23%. he can afford a home priced at: I . $210,273 (correct) Rationale: Maximum home prlce using front ratio: = $7,000(.28H[(.95 1: .006321] + 32112 +.0073!12] = $1,960!(.006005 + .002667 + .00065)