9 Question 16 of 19 P Samuel is comparing two potential housing options. Samuel plans to...

Transcribed Image Text:

9 Question 16 of 19 P Samuel is comparing two potential housing options. Samuel plans to stay in the home for 6 years, after which he plans to move again. Samuel earns 12% annually on his other investments. He determines the following information about each option: OPTION 1: Purchase a home Purchase a $400,000 home with a 30-year fixed mortgage Loan amount = $400,000 (100% financing) Annual mortgage interest rate = 8.20% " Monthly mortgage payments = $2,991.02 Additional monthly costs (insurance, taxes, maintenance) = $350.00 Real estate growth rate = 4% annually OPTION 2: Rent a home Monthly rental payments = $1,650.00 What is the estimated future value of the home purchased with Option 1 after the 6 years assuming the home is expected to increase in value 4% annually over the 6 years? Make your answer a positive number, and round to the nearest dollar if necessary. $ How much principal will Samuel owe on the loan after the 6 years? Make your answer a positive number, and round to the nearest dollar if necessary. $ What is the present value of Option 1 assuming the home is expected to increase in value 4% annually over the 6 years, and Samuel earns 12% annually on his other investments? Make your answer a positive number, and round to the nearest dollar if necessary. $ What is the present value of Option 2 assuming Samuel earns 12% annually on his other investments? Make your answer a positive number, and round to the nearest dollar if necessary. $ Based on your time value of money calculations, which of these two options should Samuel pursue? Option 1 9 Question 16 of 19 P Samuel is comparing two potential housing options. Samuel plans to stay in the home for 6 years, after which he plans to move again. Samuel earns 12% annually on his other investments. He determines the following information about each option: OPTION 1: Purchase a home Purchase a $400,000 home with a 30-year fixed mortgage Loan amount = $400,000 (100% financing) Annual mortgage interest rate = 8.20% " Monthly mortgage payments = $2,991.02 Additional monthly costs (insurance, taxes, maintenance) = $350.00 Real estate growth rate = 4% annually OPTION 2: Rent a home Monthly rental payments = $1,650.00 What is the estimated future value of the home purchased with Option 1 after the 6 years assuming the home is expected to increase in value 4% annually over the 6 years? Make your answer a positive number, and round to the nearest dollar if necessary. $ How much principal will Samuel owe on the loan after the 6 years? Make your answer a positive number, and round to the nearest dollar if necessary. $ What is the present value of Option 1 assuming the home is expected to increase in value 4% annually over the 6 years, and Samuel earns 12% annually on his other investments? Make your answer a positive number, and round to the nearest dollar if necessary. $ What is the present value of Option 2 assuming Samuel earns 12% annually on his other investments? Make your answer a positive number, and round to the nearest dollar if necessary. $ Based on your time value of money calculations, which of these two options should Samuel pursue? Option 1