Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
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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 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 and explain why.
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.
--you live in the mobile home for four years, but your roommate also pays you $3,000 a year, paid to you at the beginning of each year. The cost of the mobile home is $15,000, paid immediately. At the end of four years, you can sell the mobile home for $9,000. You have no maintenance on the home because you were such a smart manager
Using Present Value, what is the cost of your college housing (positive or negative), assuming an interest rate of 8%?
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- Michiko and Saul are planning to attend the same university next year. The university estimates tuition, books, fees, and living costs to be 12,000 per year. Michikos father has agreed to give her the 12,000 she needs to attend the university. Saul has obtained a job at the university that will pay him 14,000 per year. After discussing their respective arrangements, Michiko figures that Saul will be better off than she will. What, if anything, is wrong with Michikos thinking?arrow_forwardCarlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows 60,000 from a local bank. He uses 40,000 of the loan to buy a building and the remaining 20,000 for equipment. During the first year, the store has a loss of 24,000. How much of the loss can Carlos deduct if the loan from the bank is nonrecourse? How much does Carlos have at risk at the end of the first year?arrow_forwardWhen Should Michael Pay Housing Costs? On April 1 of next year, Michael is purchasing a $225,000 condominium and has accepted the Tenth National Bank’s offer of a ten-year $182,250 loan with an interest rate of 7%. He has a gross annual income of $100,000 and is concerned about how much his one-time up-front costs and recurring monthly costs will be. He’s received the following data and form, but he’s not certain when he is to pay each cost—at closing, monthly, or both. Your task is to help Michael by completing the form and classifying the costs. Hint: Remember that the purchase is expected to close on the first of April. This means the following: • Although a year’s worth of a cost, such as the condominium’s property taxes, may be owed by the home buyer, a portion of the total cost will be paid by the seller. • A portion of a cost, such as the homeowner’s insurance premium, may be deposited into an escrow account so that the accumulated funds will be available to pay the…arrow_forward
- Kayla Thompson is married and currently rents an apartment for $650 per month and paying $375 annually for renter's insurance. Her landlord required a $1,000 security deposit on the apartment. She just found a small townhouse she can buy for $285,000. She has enough cash for a $10,000 down payment and $4,100 in closing costs. Her bank is offering 30-year mortgages at a 6 percent annual rate. Kayla estimated the following costs as a percentage of the home's price: property taxes, 2.5 percent; homeowner's insurance, 0.5 percent; and maintenance, 0.7 percent. She is in the 25 percent tax bracket, has an after-tax rate of return on invested funds of 4 percent, and expects the townhouse to appreciate 3 percent per year. Using Worksheet 5.2, calculate the cost of each alternative and recommend the least costly option - rent or buy - for Kayla. Assume that Kayla uses the standard deduction of $24,000. Round the answers to the nearest dollar. Cost of renting: $ Cost of buying: $ Kayla…arrow_forwardArt Neuner, an investor in real estate, bought an office condominium. The market value of the condo was $280,000 with a 80% assessment rate. Art feels that his return should be 10% per month on his investment after all expenses. The tax rate is $32.50 per $1,000. Art estimates it will cost $275 per month to cover general repairs, insurance, and so on. He pays a $140 condo fee per month. All utilities and heat are the responsibility of the tenant. Calculate the monthly rent for Art.arrow_forward
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