3. Rent Versus Buy. Phillip Guadet of Monroe, Louisiana, has been renting a small, two-bedroom house for
Question:
3. Rent Versus Buy. Phillip Guadet of Monroe, Louisiana, has been renting a small, two-bedroom house for several years. He pays $950 per month in rent for the home and
$300 per year in property and liability insurance. The owner of the house wants to sell it, and Phillip is considering making an off er. The owner wants $130,000 for the property, but Phillip thinks he could get the house for
$120,000 and use his $25,000 in 5 percent certifi cates of deposit that are ready to mature for the down payment.
Phillip has talked to his banker and could get a 7 percent mortgage loan for 25 years to fi nance the remainder of the purchase price. The banker advised Phillip that he would reduce his debt principal by $1850 during the fi rst year of the loan. Property taxes on the house are
$1800 per year. Phillip estimates that he would need to upgrade his property and liability insurance to $500 per year and would incur about $1000 in costs the fi rst year for maintenance. Property values are increasing at about 3.5 percent per year in the neighborhood. Phillip is in the 25 percent marginal tax bracket.
(a) Use Table 9.4 to calculate the monthly mortgage payment for the mortgage loan that Phillip would need.
(b) How much interest would Phillip pay during the fi rst year of the loan?
(c) Use the Run the Numbers worksheet, “Should You Buy or Rent?” on page 251 to determine whether Phillip would be better off buying or renting based on his cash fl ow.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 100% (QA)
Answered By
Ashington Waweru
I am a lecturer, research writer and also a qualified financial analyst and accountant. I am qualified and articulate in many disciplines including English, Accounting, Finance, Quantitative spreadsheet analysis, Economics, and Statistics. I am an expert with sixteen years of experience in online industry-related work. I have a master's in business administration and a bachelor’s degree in education, accounting, and economics options.
I am a writer and proofreading expert with sixteen years of experience in online writing, proofreading, and text editing. I have vast knowledge and experience in writing techniques and styles such as APA, ASA, MLA, Chicago, Turabian, IEEE, and many others.
I am also an online blogger and research writer with sixteen years of writing and proofreading articles and reports. I have written many scripts and articles for blogs, and I also specialize in search engine
I have sixteen years of experience in Excel data entry, Excel data analysis, R-studio quantitative analysis, SPSS quantitative analysis, research writing, and proofreading articles and reports. I will deliver the highest quality online and offline Excel, R, SPSS, and other spreadsheet solutions within your operational deadlines. I have also compiled many original Excel quantitative and text spreadsheets which solve client’s problems in my research writing career.
I have extensive enterprise resource planning accounting, financial modeling, financial reporting, and company analysis: customer relationship management, enterprise resource planning, financial accounting projects, and corporate finance.
I am articulate in psychology, engineering, nursing, counseling, project management, accounting, finance, quantitative spreadsheet analysis, statistical and economic analysis, among many other industry fields and academic disciplines. I work to solve problems and provide accurate and credible solutions and research reports in all industries in the global economy.
I have taught and conducted masters and Ph.D. thesis research for specialists in Quantitative finance, Financial Accounting, Actuarial science, Macroeconomics, Microeconomics, Risk Management, Managerial Economics, Engineering Economics, Financial economics, Taxation and many other disciplines including water engineering, psychology, e-commerce, mechanical engineering, leadership and many others.
I have developed many courses on online websites like Teachable and Thinkific. I also developed an accounting reporting automation software project for Utafiti sacco located at ILRI Uthiru Kenya when I was working there in year 2001.
I am a mature, self-motivated worker who delivers high-quality, on-time reports which solve client’s problems accurately.
I have written many academic and professional industry research papers and tutored many clients from college to university undergraduate, master's and Ph.D. students, and corporate professionals. I anticipate your hiring me.
I know I will deliver the highest quality work you will find anywhere to award me your project work. Please note that I am looking for a long-term work relationship with you. I look forward to you delivering the best service to you.