The Marco famly-comprising Mrs. Marco aged 40, Mr. Marca, aged 39, and their three yourg chidren-relocated to Barcelona in lanuary 2020 when Mrs Marco received a job offer from an international firm. They rented a three-bedroom condominium in Barcelona for 2.150 per month, which included parking and fees. While renting made ife easy, the Marce family began weighing the pros and cons of purchasing a flat, in the same building that became avalable in June 2020. The idea of home oenership as a form of long term investment appealed to the couple. The preliminary rental payments could be used for mortge payments instead. While searching for the right property they found a nice apartment at one of the best locations of the city. The apartment was owned and had been promoted by a state-owned construction company and was offering two alternatives Qetioni renting the apartment with a perpetual contract, meaning forever. The family was very happy Iving in that area, and they had the chance to live there forever at an offered price of 1,450 EUR the tirst month, and the rent price will be growing by a 015N monthly. This option would prevent the Marco family from applying for a loan, which represented a heawy burden off the family budget. Qetion l consited in acquiring the property with a mortgage scheme for 30 years. The total price of the apartment is 850.000E. The family can pay an initial down payment of 250,000 EUR and the rest (600,000 EUR) to be paid in constant monthly payments with an annual interest rate of 2.75% compounded monthly. Mrs. Marco establihes the masimum amount they can pay monthly as 2.250. In case of taking option what is the amount of the monthly payment the Marco family should pay in 30 years (in month 360)7 (ante the amountto be pad that month, show the calculations) In case of taking option I, how much money will have the Marco tamily paid in total after 30 years? If the Marco family decides to leave Barcelona in 10 years, to attend a better offer elsewhere, what is the present value of the rental contract offered by the owner as optioni? (consider 2.75N compounded monthly as the interest/dscount rate) If Mrs Marco decides to buy the apartment, and accepts Option i, what will be the amount of each monthly payment to be done during the nest 30 vears? Mrs. Marco beleves that, if she takes option and acquires the fut, she might be interested in seling the apartment in 30 years' time. If she wants to

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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4G
7:50 AM 9 E P
U
370
93)
B/s
You
Just now
The Marco family-acomprising Mrs. Marco aged 40, Mr. Marca, aged 39, and their three young children-relocated to Barcelona in January 2020 when
Mrs. Marco received a job offer from an international firm. They rented a three-bedroom condominium in Barcelona for 2.150E per month, which
included parking and fees.
While renting made life easy, the Marco family began weighing the pros and cons of purchasing a flat, in the same building, that became available in
June 2020. The idea of home ownership as a form of long-term investment appealed to the couple. The preliminary rental payments could be used for
mortgage payments instead.
While searching for the right property they found a nice apartment at one of the best locations of the city. The apartment was owned and had been
promoted by a state-owned construction company and was offering two alternatives
Option renting the apartment with a perpetual contract, meaning forever.
The family was very happy iving in that area, and they had the chance to live there forever at an offered price of 1,450 EUR the first month, and the rent
price will be growing by a 015N monthly. This option would prevent the Marco family from applying for a loan, which represented a heavy burden off
the tamly budget.
Oerion l consisted in acquiring the property with a mortgage scheme for 30 years. The total price of the apartment is 850.000C. The family can pay an
initial down payment of 250,000 EUR and the rest (600,000 EUR) to be paid in constant monthly payments with an annual interest rate of 2.75%
compounded monthly.
Mrs. Marco establishes the maximum amount they can pay monthly as 2 250€
In case of taking option L what is the amount of the monthly payment the Marco family should pay in 30 years (in month 360)? (only the amount to be
paid that month, show the calculations)
In case of taking option I, how much money will have the Marco family paid in total after 30 years?
If the Marco family decides to leave Barcelona in 10 years, to attend a better offer elsewhere, what is the present value of the rental contract offered by
the owner as option 1? (consider 2.75% compounded monthly as the interest/discount rate)
If Mrs. Marco decides to buy the apartment, and accepts Option il, what will be the amount of each monthly payment to be done during the next 30
years?
Mrs. Marco believes that, if she takes optionl and acquires the flat, she might be interested in selling the apartment in 30 years time. If she wants to
recover al the money invested (initial payments plus all monthly payments done), what will be the price she will ask for that apartment at that moment?
Mrs. Marco is happy for knowing how to calculate future values and present values, because this helps in taking financial decisions. She wonders what
the future value of the flat will be in 30 years, if the interest rate for this type of operations is an annual 2% (comp. monthly). Find the Future Vallue of
that apartment in 30 years
The Marco family thinks that the monthly payments they'll have to afford during the next thirty years are too much, and believes the seller could be
convinced about making constant payments only once per year, at the end of each year. The interest rate would still be the same 2.75% (but now that
would be compounded yearly instead of monthiy). What is the amount of the yearly payment to be done?
In this case lyearly payments) what is the total amount the Marco family wil have paid in total after 30 years? (again, just find how much has Mrs. Marco
paid in total)
In this case yearly payments), how much has the family saved if any) by paying yearly instead of monthly instalments?
In case that the Marco family pays the pending amount in yearly payments, the owner can only grant them 2.75% interest during the first 10 years.
There is the possibility that, after the first 10 years the interest rate increases to a 3.25% for the remaining 20 years. How much st
pay per year from year 11 onwards if this occurs?
hould the Marco family
Transcribed Image Text:4G 7:50 AM 9 E P U 370 93) B/s You Just now The Marco family-acomprising Mrs. Marco aged 40, Mr. Marca, aged 39, and their three young children-relocated to Barcelona in January 2020 when Mrs. Marco received a job offer from an international firm. They rented a three-bedroom condominium in Barcelona for 2.150E per month, which included parking and fees. While renting made life easy, the Marco family began weighing the pros and cons of purchasing a flat, in the same building, that became available in June 2020. The idea of home ownership as a form of long-term investment appealed to the couple. The preliminary rental payments could be used for mortgage payments instead. While searching for the right property they found a nice apartment at one of the best locations of the city. The apartment was owned and had been promoted by a state-owned construction company and was offering two alternatives Option renting the apartment with a perpetual contract, meaning forever. The family was very happy iving in that area, and they had the chance to live there forever at an offered price of 1,450 EUR the first month, and the rent price will be growing by a 015N monthly. This option would prevent the Marco family from applying for a loan, which represented a heavy burden off the tamly budget. Oerion l consisted in acquiring the property with a mortgage scheme for 30 years. The total price of the apartment is 850.000C. The family can pay an initial down payment of 250,000 EUR and the rest (600,000 EUR) to be paid in constant monthly payments with an annual interest rate of 2.75% compounded monthly. Mrs. Marco establishes the maximum amount they can pay monthly as 2 250€ In case of taking option L what is the amount of the monthly payment the Marco family should pay in 30 years (in month 360)? (only the amount to be paid that month, show the calculations) In case of taking option I, how much money will have the Marco family paid in total after 30 years? If the Marco family decides to leave Barcelona in 10 years, to attend a better offer elsewhere, what is the present value of the rental contract offered by the owner as option 1? (consider 2.75% compounded monthly as the interest/discount rate) If Mrs. Marco decides to buy the apartment, and accepts Option il, what will be the amount of each monthly payment to be done during the next 30 years? Mrs. Marco believes that, if she takes optionl and acquires the flat, she might be interested in selling the apartment in 30 years time. If she wants to recover al the money invested (initial payments plus all monthly payments done), what will be the price she will ask for that apartment at that moment? Mrs. Marco is happy for knowing how to calculate future values and present values, because this helps in taking financial decisions. She wonders what the future value of the flat will be in 30 years, if the interest rate for this type of operations is an annual 2% (comp. monthly). Find the Future Vallue of that apartment in 30 years The Marco family thinks that the monthly payments they'll have to afford during the next thirty years are too much, and believes the seller could be convinced about making constant payments only once per year, at the end of each year. The interest rate would still be the same 2.75% (but now that would be compounded yearly instead of monthiy). What is the amount of the yearly payment to be done? In this case lyearly payments) what is the total amount the Marco family wil have paid in total after 30 years? (again, just find how much has Mrs. Marco paid in total) In this case yearly payments), how much has the family saved if any) by paying yearly instead of monthly instalments? In case that the Marco family pays the pending amount in yearly payments, the owner can only grant them 2.75% interest during the first 10 years. There is the possibility that, after the first 10 years the interest rate increases to a 3.25% for the remaining 20 years. How much st pay per year from year 11 onwards if this occurs? hould the Marco family
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