Question 1 What would be the better outcome, renting or buying and by how much? (Show your work and include all financial calculators) Calculate the investment value of renting versus home ownership. Question 2 Based on your answer in Question 1, what factors would make you change your mind and choose the other. List a minimum of 3 reasons or factors and elaborate as to why

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Pierre is deciding whether he should rent or buy a house. Assuming that renting an apartment will cost of him $1,500 per month and the mortgage on a house is $3,500 per month.

 

If he rents, he considers investing the difference between monthly rental cost and mortgage cost in a Balanced Fund earning 8% per year. If the house he purchases in Oshawa, Ontario costs about $800,000 and he intends on paying off the mortgage after 25 years.

 

If he decides to sell the house in 25 years and the house appreciates at a rate of 4% per year:

 

  • Question 1
    • What would be the better outcome, renting or buying and by how much? (Show your work and include all financial calculators)
    • Calculate the investment value of renting versus home ownership.
  • Question 2
    • Based on your answer in Question 1, what factors would make you change your mind and choose the other.
    • List a minimum of 3 reasons or factors and elaborate as to why.
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