Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. a family currently live in an apartment whose mont

A family currently live in an apartment whose monthly rent is $1050. They are thinking...

70.2K

Verified Solution

Question

Finance

image
A family currently live in an apartment whose monthly rent is $1050. They are thinking of buying a house which would cost $250,000. They plan to live in this house for 5 years and sell it at the end of the 5th year. They would put a downpayment of $25,000 and finance the balance through a mortgage at 3% interest rate. The mortgage is to be repaid in 5 annual installments (which include both principal and interest) at the end of each year for the next 5 years The house will have the following additional expenses: annual maintenance: $1500; Property taxes:$5500; Insurance: $1200. Assume they are in tax bracket of 20% and the price of home, rent and expenditure increases by 2% per year. Their opportunity cost or required rate of return is 5% per year. Note that property taxes are tax deductible and there no tax payable on capital gains. Use annual compounding for amortization schedule of mortgage. Should they buy this house or continue to rent? Buy since IRR is 5.27% O Buy since IRR is 5.51% Rent since IRR is 4.68% O Rent since IRR is 4.57% D A

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Suppose you own 50,000 shares of common stock in a firm with 2.5 million total shares...

Finance
Q

A student is a lab isolated DNA from a transgenic mouse, a model used to study...

Biology
Q

For the following two cases, find (i) the antenna current that is required so that the...

Electrical Engineering
Q

Using the same MNC and host country as you did in your previous discussion forum, create...

General Management
Q

The chromosome number of lily is 2n 24 How many chromosomes are present in a...

Biology
Q

p59 A constant force of magnitude 30 N makes an angle of 150 measured counterclockwise...

Physics
Q

You are traveling on a zip-line between two towers. A bird's eye view of the...

Basic Math
Q

10. Vastine Medical, Inc., is considering replacing its existing computer system, which was...

Accounting
Q

Question 4 "(Chapter 4) In order to understand the effectiveness of their new marketing campaign,...

Accounting
Q

On 28 April 20X2, Peele Realty purchased land and building for $5.25 million and $3.39...

Accounting
Q

A. Increase by $228.800 B. Increase by $100,932 C. Increase by $356,668 D. Decrease by...

Accounting
Q

Which of the following conditions is not required for an employee stock purchase plan to...

Accounting