Thursday, May 15, 2008

today May 14

we keep doing some problem :

The Petri Family: A Buy vrs. Rent Case Study The Petri family needs to move, and so they are looking for another home. They are considering buying or renting a home. The price of a suitable home is $125 000. The cost of renting a similar home is $875 per month. They have $21 000 invested in an account that is growing by 7% per year, and they will use this for the down payment and to cover the 'Additional Costs when Purchasing a Home' if they buy. They have also checked with their bank about a mortgage, and they can get a 25-year mortgage at 7.25% to pay for the balance of the home. Other things to consider are:

• the 'Additional Costs when Purchasing a Home' are $6000.00, and so they will have $15 000 for the down payment

• annual property taxes are about 1.5% of the value of the home

• the home is expected to appreciate at 4% per year

• rental payments are also expected to increase 4% per year

• they expect to receive 7% per year growth in their investment if they do not use the $21 000 as a down payment for the home.

1. What is the amount of the monthly mortgage payment?

2. If the property taxes are 1.5% of the market value, how much are property taxes the year they buy the home?After they own the home for 10 years?

***use the home price times 0.015 to find how much taxes for 1 year

***use the home price times 1.04 and power of 10 for 10 years = home with a appreciate for 10 years

***then times 0.015 to find the taxes after 10 years

3. What percent of the first mortgage payment is used to pay interest?

***we'll find the interest of the first payment.

***then / the monthly payment to get the percentage.

5. If the market value of the home increases 4% per year, what is the value of the home after 10 years?
***home price times 1.04 power of 10 cause it's for 10 years
6. If they rented the home for one year at $875 per month, how much would they pay for the year?How much would the annual rental charge be for the 10th year they rent if rental rates increase 4% per year.
***monthly rental charge times 12(12 months in a year)
*** rental charge times 1.04 (the rental rate for a year) power of 10 (10 years)
7. If they rent the house and invest the $21 000 at 7% per year, how large would the investment be after 10 years?
*** TVM solver is good for this.
8. What equity does the Petri family have in the home immediately after buying it? After 2 years? After 3 years?
***∑Prn(1,12); ∑Prn(1,24); ∑Prn(1,36)
9. How do the mortgage payments and rental payments compare during the first year? After 5 years? After 10 years?
*** rental charge times 1.04 power of number of years.
***then - monthly payment of buying.
10. i don't understand question 10........... :( need help
homeworks to do.........
Next scribe is David-san

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