Question

Calculate the rental cost and buying cost, these answers are incorrect.

Based on the following data, would you recommend buying or renting? Rental Costs Annual rent Insurance Security deposit $ 7,680 $ 175 $ 800 Buying Costs Annual mortgage payments $10,400 (9,725 is interest) Property taxes $ 1,900 Down payment/closing costs $ 5,100 Growth in equity $ 675 Insurance/maintenance $ 1,350 Estimated annual appreciation $ 2,000 Assume an after-tax savings interest rate of 8 percent and a tax rate of 30 percent. Assume this individual has other tax deductions that exceed the standard deduction amount. a. Calculate total rental cost and total buying cost. (Do not round intermediate calculations. Round your answers to the nearest whole dollar.) Rental cost Buying cost $ $ 8,147 8,054

Answer 1

$ Rental Costs Rent Insurance Interest lost on security deposit 7,680 175 64 =800*8% $ Buying Costs Mortgage payments $ 10,400 Taxes, insurance, maintenance $ 3.250 1=1900+1350 | Interest lost on down payment, $ 408 1=5100*8% closing costs Growth in equity $ (675) Annual appreciation $ (2,000) Tax savings for mortgage interest | $ (2,918)=-9725*0.3 Tax savings for property taxes $ (576) =-1920*0.3 Total buying costs $7,890 Total rental costs $7,919 | Buying should recommended. It has least cost

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