Assume you buy a house for $540,000 and have $108,000 as a down payment Your mortgage rate is 3 percent APR compounded semi-annually and you amortize the mortgage over 25 years with monthly payments. You will assume that you could have earned 5 percent EAR on the down payment (opportunity cost), your marginal income tax rate is 40 percent, real estate fees are 4 percent +HST, and property taxes will be $5,400 annually for this calculation. Ignore maintenance costs a What is the true return on your investment if you sell it in 6 years for $860,000? (Do not round your intermediate calculetions Round your answer to 2 decimal places, Omit the "" sign in your response.) Return on Investment b What is an approximate annualized rate of return on your investment? (Do not round your intermediate calculetions. Round your answer to 3 decimal places. Omit the "" sign in your response.) Annualized Rate of Return

Algebra and Trigonometry (6th Edition)
6th Edition
ISBN:9780134463216
Author:Robert F. Blitzer
Publisher:Robert F. Blitzer
ChapterP: Prerequisites: Fundamental Concepts Of Algebra
Section: Chapter Questions
Problem 1MCCP: In Exercises 1-25, simplify the given expression or perform the indicated operation (and simplify,...
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Assume you buy a house for $540,000 and have $108,000 as a down payment Your mortgage rate is 3 percent APR compounded
semi-annually and you amortize the mortgage over 25 years with monthly payments. You will assume that you could have earned 5
percent EAR on the down payment (opportunity cost), your marginal income tax rate is 40 percent, real estate fees are 4 percent +HST,
and property taxes will be $5,400 annually for this calculation. Ignore maintenance costs
a What is the true return on your investment if you sell it in 6 years for $860,000? (Do not round your intermediate colculetions.
Round your answer to 2 decimal places. Omit the "" sign in your response.)
Return on Investment
b What is an appraximate annualized rate of return on your investment? (Do not round your intermediete calculetions. Round your
answer to 3 decimal places. Omit the "" sign in your response.)
Annualized Rate of Return
Transcribed Image Text:Assume you buy a house for $540,000 and have $108,000 as a down payment Your mortgage rate is 3 percent APR compounded semi-annually and you amortize the mortgage over 25 years with monthly payments. You will assume that you could have earned 5 percent EAR on the down payment (opportunity cost), your marginal income tax rate is 40 percent, real estate fees are 4 percent +HST, and property taxes will be $5,400 annually for this calculation. Ignore maintenance costs a What is the true return on your investment if you sell it in 6 years for $860,000? (Do not round your intermediate colculetions. Round your answer to 2 decimal places. Omit the "" sign in your response.) Return on Investment b What is an appraximate annualized rate of return on your investment? (Do not round your intermediete calculetions. Round your answer to 3 decimal places. Omit the "" sign in your response.) Annualized Rate of Return
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