Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

One year ago you bought a $1,000,000 house partly funded using a mortgage loan. The loan size was $800,000 and the other $200,000 was your

One year ago you bought a $1,000,000 house partly funded using a mortgage loan. The loan size was $800,000 and the other $200,000 was your wealth or 'equity' in the house asset. The interest rate on the home loan was 4% pa. Over the year, the house produced a net rental yield of 2% pa and a capital gain of 2.5% pa. Assume that all cash flows (interest payments and net rental payments) were paid and received at the end of the year, and all rates are given as effective annual rates including the home loan rates. What was the total return on your wealth over the past year?

Select one: a. 0.4808% pa b. 2% pa c. 4.5% pa d. 6.5% pa e. 8.5% pa

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

Introduction To Estimating Economic Models

Authors: Atsushi Maki

1st Edition

0415589878, 978-0415589871

More Books

Students also viewed these Finance questions

Question

Solve the equation. |2x| = 6

Answered: 1 week ago