Question
A house in a college town recently sold for $250k. The market interest rate is 5% per year. a) According to the arbitrage condition, what
A house in a college town recently sold for $250k. The market interest rate is 5% per year.
a) According to the arbitrage condition, what is the annual rental rate if the buyer of the house chooses to rent to students?
b) Suppose the buyer has a marginal tax rate of 25%. He borrowed the entirety of the sum needed to buy the house. If he chooses to live in the house, he would be eligible for the MITD. Given the arbitrage condition, what is the implicit rental rate for our buyer if he lives in the home?
c) Suppose the buyer made a down payment of $50k on the house (20%), and borrowed the remaining $200k. What is the implicit rental rate for the buyer if he chooses to live in the home?
d) We?ve got three different rental rates in parts a-c. Why? Explain what?s going on in a clearly written paragraph using economic terminology.
Math 273-02, Written Assignment 9 Name: ID#: I prefer that you submit your answers on a printed copy of this document, like it's a quiz or exam. However, you may instead rewrite the questions by hand before solving them. Staple sheets together, in order. Be neat. Always give enough work and clear explanation so that fellow students could follow what you did (from start to finish) just by reading your paper. Numbers in [ ] give point values for each question. [6] 1. Evaluate Z 2 2 Z 1 2Z 1 e xy 2 z dz dx dy. [8] 2. Let E be the region under the plane z = 1 + y and above Z Z Z the region in the xy-plane bounded by the curves 6xy dV . y = x, y = 0, and x = 1. Sketch E, and evaluate E [6] 3. Sketch the region whose volume is given by Z 0 dx dy dz. 1 Z 1xZ 22z 0 0 dy dz dx. Rewrite the integral in the orderStep by Step Solution
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