2. A landlord wants to acquire an additional apartment building for $250,000. The new buildingcontains eight apartment units, which will each rent for $500 per month. The bank is willing toloan the landlord the money for a long-term, 30-year loan at a 5.5 percent interest rate.Calculate the monthly payment and explain whether taking this loan for the new building is asmart business decision. (10 points)

Answer:monthly payment is about $1422 (rounded)"taking this loan would be a smart decision because even after paying off the loan, he is still making a handsome profit (because his income per month is more than his loan payment)."Step-by-step explanation:The loan is an annuity so we use the formula for annuity to find the monthly payments he has to make.[tex]PV=C*\frac{1-(1+r)^{-n}}{r}[/tex]Where PV is present value of the loan (250,000)C is the monthly payment (what we are trying to find)n is the number of months (30 years * 12 = 360 months)r is the rate of interest per month ( i = 5.5%/12 = 0.0046)Putting these values, we solve for C:[tex]PV=C*\frac{1-(1+r)^{-n}}{r}\\250,000=C*\frac{1-(1+0.0046)^{-360}}{0.0046}\\250,000=C*\frac{1-1.0046^{-360}}{0.0046}\\250,000=C*175.7332\\C=1422[/tex]So monthly payment is about $1422 (rounded)Since, each of the 8 apartments are going to be rented out at 500, total monthly income would be 8 * 500 = $4000taking this loan would be a smart decision because even after paying off the loan, he is still making a handsome profit (because his income per month is more than his loan payment).