Jordans parents are considering two housing potions for their son while he attends university. The first option is to rent a one bedroom apartment at a cost of $900 per month, including all utilities for 9 months of the year.

The other option is to buy a three bedroom home for $325,000 that would required a 10% down payment with a mortgage amortized over 25 years at an annual rate of 4.35% compounded semi- annually for a 5 year term. They could rent the two bedrooms to other students and generate $8,000 a year. The cost of taxes, utilities and maintenance would be $3,600 per year and they believe the home will be worth 5% less in five years.

a) What would the cost of renting be for the five years?

b) What were the monthly mortgage payments? Please identify each number.

N =

I% =

PV =

PMT =

FV =

P/Y =

C/Y =

Monthly Payment =

c) What was the house worth after 5 years?

d) How much is still owed on the house after five years?

N =

I% =

PV =

PMT =

FV =

P/Y =

C/Y =

Still owed =

e) What was the cost to the parents to subsidize the house each year?