Your annual gross (pre-tax) salary is $67,000. You can obtain a 30-year fixed rate mortgage at annual percentage rate (or APR) of 6.0%. You have $5,000 in other annual pre-tax income. You also have to pay $750 per month on an auto loan and student loans. What is the most expensive home you can buy under these circumstances?

3. What is the maximum amount you can borrow if you want to meet both the front-end and back-end ratio requirements? (Hint: Let c be the maximum monthly payment that will meet both the front-end and back-end ratios. Then c is the lesser of the two maximum allowed mortgage payments as computed in Problems 1 and 2. The maximum amount you can borrow is PV = (c / r) x (1- 1/(1+r)^t where r = monthly interest rate = APR / 12 and t = total number of monthly payments in a 30-year mortgage.)

A. $215,643

B. $227,752

C. $235,176

D. $248,367