Math for Finance – Ch. 7 Test (Version A)

Definition: The amount of space inside a three-dimensional region, such as a room.

Definition: The money the bank collects from homeowners for insurance and property taxes.

Definition: A building where each unit is individually owned; tenants share the same main entrance and exit, but the units are usually stacked next to each other, which limits privacy.

Definition: A mortgage in which the monthly payment and average percentage rate (APR) remain the same throughout the entire loan.

Definition: This is required by mortgage holders, a type of insurance that covers the damage to the home due to fire or other natural disasters.

Definition: A loan taken out by anyone that wants to purchase a home.

A financial advisor tells you that you should spend, at most, 25% of your gross monthly income for your rent. You determine that amount is $1,655 per month. Based on that amount and your financial advisor's recommendation, what is your ANNUAL salary?

The square footage and monthly rental of many similar 1-bedroom apartments yield the linear regression equation y = 1.06x + 799.31, where 'y' represents the monthly rental price and 'x' represents the square footage. If you're able to afford rent at $1,815 per month, using the equation, what size apartment can you afford (max. square footage)? Round your answer to the nearest whole number.

Your relative is trying to find a home to rent. They currently bring in $82,500 per year. Using the 25% - 30% interval range, help them find out what they can actually afford to pay for rent each month. Include change ($0.30, for example) if your answer accounts for it.