Suppose that you invest $ 50,000 into a downpayment on a $ 250,000 house, which has a price appreciation of 3% per year. Your mortgage is fixed at $ 36,000 per year, and your tenants pay you $ 24,000 per year. Property taxes, maintenance, and other expenses cost $ 5,000 per year. Suppose that after 25 years, you sell your property.

Would it have been better to invest $ 50,000 in the stock market, assuming it has returns of 9% per year over the same time period (25 years)? Why? Show your calculations and justify your answer. For the purposes of this question, suppose that inflation is zero.

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First lets calculate how much would be the final value of the house after 25 years The appreciation of the house compound annually Using the formula f... View the full answer