compare the costs of owning a home against renting a home. Assume a home can be purchased for $180,000 with a $45,000 down payment and financed with a fully amortizing mortgage loan of $135,000 at 6.5 percent interest for 30 years. Other costs associated with owning include annual maintenance (initial cost of $750), insurance (initial cost of $1,600), and property taxes (initial cost of 2.5 percent of property value). These expenses would not need to be paid if renting. Assume that growth rates for expenses (including insurance, maintenance, and property taxes) equal to 2 percent per year. Assume the property value will grow at a rate of a constant 2 percent per year. After six years, the property will be sold. A selling expense of 7 percent would have to be paid at that time. Assume the income tax rate is 24 percent. Alternatively, assume the home can be rented for $15,000 for the first year, with an annual 2 percent growth rate in rent.

Be sure to show your work in Excel. In other words, do not simply type values into the boxes, but reference prior cells when calculating results.

Part 2: Loan Schedule

1. Fill in the table for the loan schedule over six years. Make sure you reference cells (e.g., monthly payment and periodic rate).

1. Fill in the table for the yearly summary of the loan schedule. These values should be referenced from Section C. For example, Interest for year 1 would be the sum of Interest in months 1 through 12.

1. Fill in the table for the yearly property data. Apply the FV function or FV formula using correct growth rates.