Akiko and her husband are trying to decide whether to rent or to purchase a new condominium. After looking for several months, they$$ve narrowed their choice down to one particular unit, and the builder is willing to lease or sell$$depending upon the preference of the buyer.

To perform a rent$-$or$-$buy analysis, Akiko and her husband have collected the following information:

$$ If they rent, the builder will require monthly rental payments of $$1,200$ and a security deposit equal to two months of rent.

$$ Since they want to be protected against the possible loss of their possessions, they will purchase a renters$$ policy of $$200$ every six months, while a more comprehensive homeowners$$ policy will cost $0\mathrm{.}5\%$ of the home$$s value per year.

$$ Money used to fund the unit$$s security deposit could otherwise be invested to earn $5\%$ per year after taxes. Funds expended for a home$$s down payment and closing costs also incur an opportunity cost.

$$ If the unit is purchased, it will cost $$85,000$ and will require a $20\%$ down payment. The loan will carry an interest rate of $6\%,$ a term of $30$ years, and monthly payments of $$408.$ The closing costs associated with the unit$$s mortgage will be $$3,500.$

$$ The property taxes and the maintenance and repair expenses on the unit are estimated to be $2\%$ and $1\%$ of the unit$$s total price, respectively.

$$ Your ordinary income is taxed at the rate of $28\%,$ and you$$ll be willing to itemize your tax deductions in the event that you purchase your new home.

$$ Financial publications report that home values are expected to increase by $3\%$ this year due to inflation.

Complete a rent$-$or$-$buy analysis worksheet to determine the total cost of renting and the total cost of purchasing Akiko and her husband$$s prospective house and then recommend their best strategy. To complete the worksheet, enter the appropriate values in their corresponding blanks and round each value to the nearest whole dollar.RENT$-$OR$-$BUY ANALYSIS FOR HOUSING

COST OF RENTING

$ Amount

Security deposit

Annual rental cost

Renter's insurance

Opportunity cost on security deposit

Total Annual Cost of Renting:

COST OF BUYING

Monthly mortgage payment

Annual mortgage payments

Property taxes

Homeowner's insurance

Maintenance expenses

Opportunity cost of down payment and closing costs

Total costs

Less

Reduction of loan principal

Tax savings on mortgage interest deduction

Tax saving on property tax deduction

Total deductions

Annual after$-$tax cost of homeownership

Estimated annual appreciation in home value

Total Annual Cost of Purchasing:

Based on this analysis, Akiko and her husband should:

Purchase the home, as the total cost of purchasing is less than the cost of renting

Rent the home, as its total cost is less than the total cost of purchasing

Purchase the home, as the cost of purchasing is greater than the cost of renting