Conor is comparing two potential housing options. Conor plans to st the home for 4 years, after which he plans to move again. Conor ear 12% annually on his other investments. He determines the following information about each option: OPTION 1: Purchase a home • Purchase a $270,000 home with a 30-year fixed mortgage Loan amount = $270,000 (100% financing)
Conor is comparing two potential housing options. Conor plans to st the home for 4 years, after which he plans to move again. Conor ear 12% annually on his other investments. He determines the following information about each option: OPTION 1: Purchase a home • Purchase a $270,000 home with a 30-year fixed mortgage Loan amount = $270,000 (100% financing)
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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Transcribed Image Text:Conor is comparing two potential housing options. Conor plans to stay in
the home for 4 years, after which he plans to move again. Conor earns
12% annually on his other investments. He determines the following
information about each option:
OPTION 1: Purchase a home
• Purchase a $270,000 home with a 30-year fixed mortgage
• Loan amount = $270,000 (100% financing)
• Annual mortgage interest rate = 6.00%
Monthly mortgage payments = $1,618.79
• Additional monthly costs (insurance, taxes, maintenance) = $350.00
• Real estate growth rate = 5% annually
.
Transcribed Image Text:What is the present value of Option 1 assuming the home is expected to
increase in value 5% annually over the 4 years, and Conor earns 12%
annually on his other investments?
Make your answer a positive number, and round to the nearest dollar if
necessary.
$
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