1) Bob is considering buying a home and selling it in one year. At t=0 he buys a house, the price is $100,000. At t=1 the house appreciates (i.e. the price goes up) by 20%, and Bob sells it.

Bob also pays transaction costs: buying costs are 5% of buying price, selling costs are 8% of selling price. Each time period is a year. Bob does not take any mortgages. Find the NPV of this project if the interest rate is 4%.

2)Find the IRR of Bobs investment in the previous question.