In October 2019, the average rent for a two-bedroom apartment in Ottawa was approximately $1,720 per month. Whereas the average house price was approximately $465,000. Assume for all payments that they are made at the end of each period.

1) Based on the 3 percent mortgage rate (compounded semi-annually), what would be the Effective Annual Rate for this mortgage rate?

a.2.764%

b.2.558%

c.3.023%

d.3.235%

e.2.870%

2) What would be the Effective Monthly Rate for this mortgage rate?

a. 0.1854%

b. 0.3561

c. 0.1937

d. 0.4722

e. 0.2485

3)Based on 3 percent mortgage rate (compounded semi-annually), what would be the largest mortgage amount that one could afford, based on a 20-year mortgage with monthly payments that are equal to the average rental payment of $1,720.

a.299,781

b.420,465

c.296,457

d345,213

e310,656

4) Based on the same mortgage rate above (i.e. 3% semi-annually compounded with monthly payments), what would be the mortgage payments on the average Ottawa house (assuming 100% financing) of $465,000.

a. 3,112.82

b.3010.62

c.2642.42

d.2739.47

e.2574.56

5)Assume that you invest the difference between the mortgage payment (Question 24) and the rental payment in a balanced mutual fund that averaged a 5 percent return (compounded monthly) for 20 years, approximately how much would you have accumulated (Future Value)

a. 351,251.28

b.331,456.74

c.275,465.39

d.301,944.32

e401,456.74

Assume that the house prices increase an average of 3 percent per year (annual compounding) for the next 20 years, what would the future value of the $465,000 house.

a 975,212.74

b821,780.61

c902,561.44

d839,841.72

e756,891