Time Value of Money - Buy vs Rent Decision Rebecca Young recently graduated from Masters program and started working for a consulting company. She is faced with the decision of purchasing a new condominium for $250,000 or continuing to live in a rented condominium with a monthly rent of $1,250. Prevailing interest rates are 4%. She expects to stay in either the rented or purchased condominium for 10 years. It is important to note that there are many items to consider. Primarily, Rebecca would need to acquire a mortgage to finance the new condominium, and provide a down payment of 20%. If she were to rent a condominium, she could invest her $50,000 down payment and hopefully achieve a Rate of Return higher than her mortgage interest rate. There is also the consideration that her investment in purchasing the condominium would appreciate as the value of the condominium increased - most likely. The decision to purchase or rent includes many additional considerations such as relocation flexibility, additional costs in purchasing (taxes, maintenance, closing costs, etc.), using your home as an equity asset, and many other considerations. These are outside the scope of this question. Be sure to include any assumptions made in answering this question. What should Rebecca do ? Be sure to justify your answer.
