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It might be a good idea to buy a mobile home to use while you are going to school. Suppose you live in the
It might be a good idea to buy a mobile home to use while you are going to school. Suppose you live in the mobile home for four years, but your roommate also pays you $3,000 a year, paid to you at the beginning of each year. The cost of the mobile home is $20,000, paid immediately. At the end of four years you can sell the mobile home for $14,000. You have no maintenance on the home because you were such a smart manager. a) b) (5) Using Present Value, what is the cost of your college housing (positive or negative), assuming an interest rate of 8%? (5) Using Future Value, what is the cost of your college housing, assuming the same interest rate? c) (3) Are your two answers the same or different? d) (3) Why are they different or the same?
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