Based on an interest rate of 4.9% per year and a monthly payment of $365 for 5 years, Bob can afford to borrow $19,388.64 today.
The present value is the discounted value of future cash flows. It can be computed by using an online finance calculator as follows or the annuity present value formula.
N (# of periods) = 60 (5 years x 12 months)
I/Y (Interest per year) = 4.9%
PMT (Periodic Payment) = $365
FV (Future Value) = $0
P/Y (# of periods per year) = 12
C/Y (# of times interest compound per year) = 12
Results:
PV = $19,388.64
Sum of all periodic payments = $21,900 ($365 x 60)
Total Interest = $2,511.36
Thus, based on the given facts, Bob can afford to borrow $19,388.64 today.
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