Preface:

Suppose Beyonc and Jay-Z want to purchase a home that costs $88 million, but they are willing to pay $100 million for the house. They plan on keeping the home for 1 year and selling it. Jay-Z and Beyonc have $88 million in a brokerage account invested in the stock market that has an expected return of 10% over the course of the next year. Wells Fargo will give them a $88 million mortgage at a 4% fixed interest rate with no money down. The mortgage is only for 1 year and the interest and principal payments are due at the end of the year. Assume there are no tax benefits associated with the mortgage.

Instructions:

Using the information in the preface, fill in the blank information throughout the following steps of the economic decision making process to ascertain whether Beyonc and Jay-Z should take out an $88 million mortgage for 1 year, or whether they should pay the house off and have no mortgage.