Answers to problem 3? See attached file for information regarding ALV

Problem Set 1 1. You are making a decision whether to buy the townhouse you are currently renting. If you buy it, you have to pay the following costs. Townhouse price: $150,000 (You have enough money to pay the 20% down payment, and the remaining 80% will be financed by a mortgage.) Annual capital cost (including both mortgage interest and risk premium associated with home equity): $9,500 Annual property tax (after taking account of the income-tax benefit): $2,300 Annual maintenance costs and capital reserve: $2,000 Insurance premium: $700 Annual utility costs (electricity, water, sewage, garbage): $1,300 Expected net home price appreciation (market appreciation - depreciation): +2%/year Initial fees at purchase: zero (just for simplicity) Your current rental costs are the following: Gross rent: $1,200/month (no extra costs for electricity, water, sewage, or garbage) Security deposit: zero (just for simplicity) Expected annual rent increase: +0%/year Using the relation that the equilibrium rent should equal the user cost of housing, analyze whether you should buy the apartment. 2. Quantitative Problem 11.14 on page 253 3. Quantitative Problem 30.12, a and e, on page 805