For most people, buying a house is the biggest single investment decision they will make. The years of saving and the decades of paying off a mortgage consume a large portion of most peoples lives. Some say home ownership is an integral part of achieving the American Dream.

The following are the basic assumptions to get started with our own simple model:

Purchase price	$150,000
Down payment	$30,000
Mortgage interest rate (annual)	6%
Principal amortization (years)	30
Annual maintenance	$1,200
Annual insurance	$1,500
Appreciation of house (annual)	2%

What is the monthly payment?

	1.	$777
	2.	$624
	3.	$719
	4.	$696

0.5 points

QUESTION 2

How much total cash will it take you to pay off the mortgage over 30 years?

	1.	$368,526
	2.	$259,006
	3.	$235,115
	4.	$273,181

0.5 points

QUESTION 3

How much will you pay in maintenance over 30 years?

	1.	$45,000
	2.	$22,500
	3.	$36,000
	4.	$18,000

0.5 points

QUESTION 4

How much will you pay in insurance over the 30 years?0

		$45,000
		$36,000
		$18,000
		$22,500

0.5 points

QUESTION 5

Your alternative is renting a house. Assume you find there is a similar house nearby for rent. Assume that it has all the same municipal services, the same school system, the same transportation, the same cost of utilities, etc. These are important factors in real life but we will ignore them for this exercise.

Cost of renting similar home (monthly)	$1,200
Assumed return on savings & investing (annual)	6%

How much will you pay in rent in total over the 30 years?

	1.	$180,000
	2.	$216,000
	3.	$432,000
	4.	$454,000

0.5 points

QUESTION 6

Assume you put the down payment into an investment account and do not add to it or take any funds out. What is the future value of this lump sum over 30 years @ 6%?

	1.	$273,181
	2.	$441,917
	3.	$269,811
	4.	$180,677

0.5 points

QUESTION 7

Assume you have stock broker handing this investment for you and he is able to generate net returns of 9% annually over the 30 years. What is the future value of this lump sum investment?

	1.	$441,917
	2.	$358,526
	3.	$269,811
	4.	$180,677

0.5 points

QUESTION 8

Assume you can earn 3% appreciation on your house. What is your house worth in 30 years?

	1.	$368,526
	2.	$235,115
	3.	$273,181
	4.	$441,917

0.5 points

QUESTION 9

Assume you can earn 12% on your investment fund with the stock broker. What is your investment of your down payment worth in 30 years?

	1.	$269,811
	2.	$441,917
	3.	$180,877
	4.	$1,078,489

0.5 points

QUESTION 10

Keeping all things the same from Question 9, your banker tells you that if you increase your down payment to 30% that you can get an interest rate of 4% with a 15-year mortgage. What would your monthly payment be?

	1.	$719
	2.	$696
	3.	$823
	4.	$777