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You are selling your house. The Smiths have offered you $200,000. They will pay you
immediately. The Joneses have offered you $275,000, but they can not pay you until three years
from today. The interest rate is 12 percent. Which offer should you choose?
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- The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $15,000 per year forever. If the required return on this investment is 8 percent, how much will you pay for the policy? Suppose the Perpetual Life Insurance Co. told you the policy costs $195,000. At what interest rate would this be a fair deal? Please do not answer in handwritten..thankuSuppose that you invest $50,000 into a downpayment on a $250,000 house, which has a price appreciation of 3% per year. Your mortgage is fixed at $ 36,000 per year, and your tenants pay you $24,000 per year. Property taxes, maintenance, and other expenses cost $5,000 per year. Suppose that after 25 years, you sell your property. Would it have been better to invest $ 50,000 in the stock market, assuming it has returns of 9% per year over the same time period (25 years)? Why? Show your calculations and justify your answer. For the purposes of this question, suppose that inflation is zero.You currently pay $10,000 per year in rent to a landlord for a $100,000 house, which you are considering purchasing. You can qualify for a loan of $80,000 at 9% if you put $20,000 down on the house. To raise money for the down payment, you would have to liquidate stock earning you a 15% return. We neglect other concerns, like closing costs, capital gains, and tax consequences of owning. Given the described situation, determine whether it is better to rent or own.
- To buy an $180,000 condominium, you put down $30,000 and take out a mortgage for $150,000 at an APR of 9% compounded monthly. Five years later, you sell the house for $205,000 (after all selling expenses are factored in). What equity (the amount that you can keep before any taxes are taken out) would you realize with a 30-year mortgage repayment term? (Assume that the loan is paid off when the condo is sold in lump sum.)You have 30 years left until retirement and want to retire with $2.6 million. Your salary is paid annually, and you will receive $76,000 at the end of the current year. Your salary will increase at 3 percent per year, and you can earn a return of 9 percent on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Perentage of Salary:______________The Perpetual Life Insurance Company is trying to sell you an investment policy that will pay you and your heirs $19,500 per year forever. a. If the required return on this investment is 6.1 percent, how much will you pay for the policy? b. Suppose the Perpetual Life Insurance Company told you the policy costs $500,000. At what discount rate would this be a fair deal?
- You are looking to buy a $415,000.00 home in Haverhill. If Bank of America will give them a 30-year mortgage at 3.25% annual interest rate for the cost of the house after they receive a 20% down payment. How much interest will they have paid? How many of her monthly payment go toward the interest? What percent increase over the cost of the home does this interest represent? Redo and re-answer all questions, but this time for 15 years?4. You wish to purchase a house that costs $294,000, and the bank requires you to have 12% of the purchase price as a down payment. Your annual salary is $44,000 and you can save 18% of this salary every year. How long will it take for you to save for the required down payment? about _____ years?You want to buy a piece of land and the owner would sell it to you for $20,000 cash. Alternatively, he would let you pay for it with five annual installments of $5,000 each, the first one due right now. What is the implied interest rate here?
- You are looking to buy a $415,000.00 home in Haverhill. If Bank of America will give them a 30-year mortgage at 3.25% annual interest rate for the cost of the house after they receive a 20% down payment. How much interest will they have paid? What percent increase over the cost of the home does this interest represent?You are offered $90,000 today or $300,000 in 11 years. Assuming that you can earn 14 percent on your money, which should you choose? If you are offered $300,000 in 11 years and you can earn 14 percent on your money, what is the present value of $300,000 ? Round to the nearest centYou currently pay $10,000 per year in rent to a landlord for a $100,000 house, which you are considering purchasing. You can qualify for a loan of $80,000 at 9% if you put $20,000 down on the house. To raise money for the down payment, you would have to liquidate stock earning a 15% return. Neglect other concerns, like closing costs, capital gains, and tax consequences of owning, and determine whether it is better to rent or own.
