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Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1 2 & 3

Use the following information to answer questions 1 - 3. Please note: (1) round to 4 decimal places; (2) Enter percentages as whole numbers, e.g. enter 7.1823% as 7.1823 not 0.0718. Don't forget a minus if the number is negative #1 Real Estate. You buy a house by putting down $100,000 and borrowing $400,000, for a total of $500,000. You rent the house out for $17,400 a year, but pay mortgage interest of 4.25% of 400,000, for Year 1. You rent it out for $18,000 a year, but pay the same mortgage interest for Year 2. Your mortgage payments do not include any principal reduction. The house appreciates in value to $510,000 in Year 1, but drops in value to $495,000 in Year 2. What is your total return for Year 1 and 2? Solve everything and then enter just answers to Q1-3. Year 1 2 IntRate 4.25% Down Loan 1,500 100,000 400,000 500,000 Rent/mo Rent/yr Int/yr Price 1,450 17,400 Total 18,000 510,000 495,000 LiqValue $CF $CapG CF% CapG% Total$ Total% ..#1.... ....#3..... ....#2.....
Transcribed Image Text:Use the following information to answer questions 1 - 3. Please note: (1) round to 4 decimal places; (2) Enter percentages as whole numbers, e.g. enter 7.1823% as 7.1823 not 0.0718. Don't forget a minus if the number is negative #1 Real Estate. You buy a house by putting down $100,000 and borrowing $400,000, for a total of $500,000. You rent the house out for $17,400 a year, but pay mortgage interest of 4.25% of 400,000, for Year 1. You rent it out for $18,000 a year, but pay the same mortgage interest for Year 2. Your mortgage payments do not include any principal reduction. The house appreciates in value to $510,000 in Year 1, but drops in value to $495,000 in Year 2. What is your total return for Year 1 and 2? Solve everything and then enter just answers to Q1-3. Year 1 2 IntRate 4.25% Down Loan 1,500 100,000 400,000 500,000 Rent/mo Rent/yr Int/yr Price 1,450 17,400 Total 18,000 510,000 495,000 LiqValue $CF $CapG CF% CapG% Total$ Total% ..#1.... ....#3..... ....#2.....
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