The answer to Exercise 8.3 is the formula that banks use to set the terms of a mortgage. If we know three of the four quantities PV, A, r, and T, we can compute the fourth. In practical terms, PV is the size of the mortgage, A is the yearly payment (usually broken up into 12 monthly payments), T is the length of the mortgage (usually 20 or 30 years), and r is the interest rate. 8.4. 8.5. 8.6. Rina is buying a house. If she takes out a 30-year $200,000 mortgage at 3% interest, how much will her monthly payments be? Rina decides that she can only afford to spend $1500/month on mortgage pay- ments. If she can find a bank that offers 30-year mortgages at 2.5% interest, how big a mortgage can she afford? In the end, Rina finds a house that she can buy with a $150,000 mortgage. If the interest rate is 2.5% and she makes payments of $1500/month, how long will it take her to pay off the mortgage?