Problem 2: You have two choices for renting an apartment in Philadelphia. The rent in the first apartment is $800 per month for the first year and $850 per month for the second year, you must sign a two-year rent agreement with the landlord. The rent for the second apartment is $500 for the first 4 month because the apartment complex is being renovated, after that the rend increases to $900 for the remaining 20 months. At what interest rate would you be indifferent between the two rent agreements?
Problem 2: You have two choices for renting an apartment in Philadelphia. The rent in the first apartment is $800 per month for the first year and $850 per month for the second year, you must sign a two-year rent agreement with the landlord. The rent for the second apartment is $500 for the first 4 month because the apartment complex is being renovated, after that the rend increases to $900 for the remaining 20 months. At what interest rate would you be indifferent between the two rent agreements?
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:Problem 2:
You have two choices for renting an apartment in Philadelphia. The rent in the first apartment is $800 per month for
the first year and $850 per month for the second year, you must sign a two-year rent agreement with the landlord.
The rent for the second apartment is $500 for the first 4 month because the apartment complex is being renovated,
after that the rend increases to $900 for the remaining 20 months. At what interest rate would you be indifferent
between the two rent agreements?
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