You have just taken a job that requires you to move to a new city....
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You have just taken a job that requires you to move to a new city. In relocating, you face the decision of whether to buy or rent a house. A sultfoble house costs $ and you have saved enough for the down payment. The nominal mortgage interest rate is per year, and you can also earn per year on savings. Mortgage interest payments are tax deductible, interest earnings on savings are taxable, and you are in a tax bracket. Interest is paid or recelived, and taxes are paid, on the last day of the year. The expected inflation rate is per year.
The cost of maintaining the house replacing womout roofing, painting, and so on is of the value of the house. Assume that these expenses also are paid entirely on the last day of the year If the maintenance is done, the house retains its full real value. There are no other relevant cosis or expenses.
The expected real aftertax interest rate on the home mortgage is Round your answer to two decimal places.
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