Jolene & Marc saved a deposit for $500,000 to buy their first investment property with a market value of $1,200,000 one year ago. The remaining $700,000 was financed using a mortgage loan with an interest rate of 2.5% p.a. Over the year the investment property appreciated in capital by 3% and generated a rental yield of 1.5%. Assume that all rates are effective annual rates and that all cash flows (interest payments and rental payments) were paid and received at the end of the year. Ignore taxes. Calculate the total return on their wealth over the one year holding period. Express your answer as a percentage, rounded to 2 decimal places. E.g. if your answer is 0.058328, type 5.83%

Jolene & Marc saved a deposit for $500,000 to buy their first investment property with a market value of $1,200,000 one year ago. The remaining $700,000 was financed using a mortgage loan with an interest rate of 2.5% p.a. Over the year the investment property appreciated in capital by 3% and generated a rental yield of 1.5%. Assume that all rates are effective annual rates and that all cash flows (interest payments and rental payments) were paid and received at the end of the year. Ignore taxes. Calculate the total return on their wealth over the one year holding period. Express your answer as a percentage, rounded to 2 decimal places. E.g. if your answer is 0.058328, type 5.83%

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 22E

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