A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a house which would cost $220,000. They plan to live in this house for 5 years and sell it at the end of the Sth year. They would put a downpayment of $20,000 and finance the balance through a mortgage at 3.5% 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 2.5% 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. Calculate the total cost of owning in year 3. O S8S11 O S8428 O SR021 O S8222
A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a house which would cost $220,000. They plan to live in this house for 5 years and sell it at the end of the Sth year. They would put a downpayment of $20,000 and finance the balance through a mortgage at 3.5% 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 2.5% 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. Calculate the total cost of owning in year 3. O S8S11 O S8428 O SR021 O S8222
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 28P
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Transcribed Image Text:A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a house which would cost $220,000. 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 S20,000 and finance the
balance through a mortgage at 3.5% 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 2.5% 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.
Calculate the total cost of owning in year 3.
O S8511
O S8428
O S8021
O S8222
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