Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Micahel owns his house which currently has a market value of $375,000. He thinks He will leave town after three years. If He continues to

Micahel owns his house which currently has a market value of $375,000. He thinks He will leave town after three years. If He continues to hold his house, he will likely sell it for $415,000 after three years. If he sells the house now, he can invest the money in a special saving account that pays 0.20% interest per month. If he sells the house, he will need to rent a place to live in for $1,200 per month. Assume for simplicity, that he freely holds the house and only pays $400 per month in property taxes and house fees to legally keep it. What would be the more economical option for him? For analysis purposes, Michael's monthly value of time is 0.35%. Assume that now, time zero, Michael does not need to pay any taxes or house fees. Payments will start by the end of the first month.

Please assume: that a calendar year has 365 days

Please assume that a calendar month has 30 days

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics

Authors: Austan Goolsbee, Steven Levitt, Chad Syverson

3rd Edition

1319105564, 978-1319105563

More Books

Students also viewed these Economics questions

Question

What is the purpose of the balance sheet?

Answered: 1 week ago