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d) Monica and her husband Richard continue to worry about their financial future. They began to question their investment in a home. They asked whether
d) Monica and her husband Richard continue to worry about their financial future. They began to question their investment in a home. They asked whether they would be better to sell their home now and invest the proceeds. They estimated that the marketable securities would provide a return of 5 percent after taxes. Monica and Richard thought the current value of their house would be $300,000 and would increase by 6 percent a year. A rental in a comparable apartment would cost $2,200 a month. Assume that Monica and Richard's marginal tax bracket is 30 percent and that they have the following expenses: Calculate the projected return on the house for the next year and give your recommendation. (10 pts) Increase in house value =[$300,000(1+6%)]$300,000=? Rent not paid =$2,20012= ? Cost of upkeep = annual maintenance + Property Taxes * (1 marginal tax rate )+ Insurance Market value of the House (at the beginning of the period) =$300,000
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