Part 1: Renting vs Buying. Ten years ago, twin brothers Ryan and Bryan inherited $100,000 each. They were talking about their different investments at the time, and how they were going to invest new money. Ryan, a newly wed at that time, has decided to buy a house for the family. Bryan has decided to rent a house and invest money into stocks or bonds. Ten years later they were discussing whose decision was more profitable. Use the data given below to answer this question. Show your detailed calculations. Round all answers to the nearest cent unless another rounding is required. 1. Ryan's investment. f. How much of the loan's principle amount has Ryan paid off? (i.e. how much has he reduced the loan balance by?) Keep in mind that interest is charged each month - it's not part of the loan balance. Show your work. g. How much interest has he paid over 10 years? Show your work. h. After selling the house for $475,000, what amount of money you will get after paying the remaining balance and closing expenses which are about 10% of the selling price? Show your work. i. What do you think, is this sale a gain or a loss? Explain your reasoning with numbers. Perhaps think about other factors (not calculated in this example) that may also affect the result. Show your work. Part 1. Renting vs Buying Ten years ago, twin brothers Ryan and Bryan inherited $100,000 each. They were talking about their different investments at the time, and how they were going to invest new money. Ryan, a newly wed at that time, has decided to buy a house for the family. Bryan has decided to rent a house and invest money into stocks or bonds. Ten years later they were discussing whose decision was more profitable. Use the data given below to answer this question. Show your detailed calculations. Round all answers to the nearest cent unless another rounding is required. 1. Ryan's Investment Ryan bought a house for $350,000 paying 20% down and financing the rest of the value at 3.25% interest for 30 years. He used the inherited money for the down-payment and remaining $30,000 for the remodeling. Ten years later, Ryan has got a new job offer, sold the house for $475,000 and moved to another city. a. How much money did Ryan pay for his down payment? Show your work. Down payment = cost x downpayment rate - 350,000 x 20% - 70,000 b. How much did he finance? Show your work. Finance = cost-down payment = 350,000 - 40,000 = 280,000 c. What was his monthly payment? Show your work. The formula: Px(4-(1+r)^-/op Calculations: 280,000 = Rx (4-(4+0.2702%)*-360/0.2723%) d. What is the remaining balance of the original loan after 10 years of payments? Show your work. The formula: Px (4-(1+r)^nn/-) Calculations: Loan balance = 1212.50 x(4-(1+0.240397)-240/0.2408%) c. How much money has Ryan paid to the loan company over 10 years? Show your work. Total amount paid = Number of mouths x Payment per month) + Down payment = (120 x 1248.50) + 70000's 1. How much of the loan's principle amount has Ryan paid off? i.e. how much has he reduced the loan balance by?) Keep in mind that interest is charged each month - it's not part of the loan balance. Show your work. Principle paid = loan amount balance loan = 280,000 - 244,842.52 = $65,157.48 2
