McKay has just made the final payment on his mortgage. He could continue to live in the home; cash expenses for repairs and maintenance (after any tax effects) would be $ 700 monthly. Alternatively, he could sell the home for $205,000, invest the proceeds in 99 percent bonds, and rent an apartment for $15,000 annually. The landlord would then pay for repairs and maintenance. Prepare two analyses of McKays alternatives, one showing no explicit opportunity cost and the second showing the explicit opportunity cost of the decision to hold the present home.

Requirement 1. Prepare two analyses of McKays alternatives, one showing no explicit opportunity cost and the second showing the explicit opportunity cost of the decision to hold the present home.Begin by performing an incremental analysis assuming that McKay sells his home, invests the proceeds in 99 percent bonds, and rent an apartment for $15,000 annually. (Use a minus sign or parentheses to show a decrease in incremental income.)

Assume McKay sells his home, invests the proceeds and rents an apartment
Less:
Incremental income effects per year

Now perform the income effect analysis taking an opportunity-cost approach. (Use a minus sign or parentheses to show a decrease in income. Leave unused cells blank.)

		Alternative Chosen:
		Hold present home
Income effects per year