Question

Rusty will be away from his $250,000 condo for 3 years. He could sell the condo, invest the money, and collect interest or he could rent out the condo. A real estate agent has told him the condo could be rented for $1,500 per month. What simple interest rate does this correspond to?

Answer 1

Answer:

7.2%

Step-by-step explanation:

In 3 years of rent, a monthly rent of $1,500 yields a total of:

$R= 3*12*\ 1,500\\R=\ 54,000$

Assuming simple interest on a $250,000 investment for 3 years, the required interest rate 'i' to obtain an interest of $54,000 is:

$54,000 = 250,000*i*3\\i=0.072=7.2\%$

The rent corresponds to a 7.2% per year simple interest rate.