The question is incomplete. The complete question is as follows.
Marquet is relocating to an area where she will be attending college. She finds a townhome with an option to rent or buy. The conditions of each are shown below. Rent: Move-in cost of $1,350 and monthly payment of $795.
Buy: Move-in cost of $8,235 and monthly payments of $750. Marquet plans to stay in the area for the 5 years it will take her to get a graduate degree, so she decides to buy. Choose the best evaluation of Marquet's decision.
a. Since the costs would be the same over the 5 year period, she will have made a good decision if the property value does not decrease.
b. She made a fairly good decision. buying the townhome will be cheaper over the 5 year period as long as she doesn't have major repairs to make.
c. She made a poor decision if the property value does not increase. Renting the townhome would be cheaper over the 5 year period.
d. There is not enough information given to determine which option is best.
Answer: c. She made a poor decision if the property value does not increase. Renting the townhome would be cheaper over the 5 year period.
Step-by-step explanation: For each situation - buy or rent - the amount of money spent will be:
To Rent:
Move-in cost: $1,350
monthly payment: $795
For a 5 year period, there is 60 months. So the monthly payment will be:
monthly payment = 795·60 = 47700
She would spent, in total:
1,350 + 47700 = $49050
To Buy:
Move-in cost: $8,235
monthly payment: $750
in that period: 750·60 = 45000
The total spent is:
8,235 + 45000 = $53235
In the 5 year period, to rent, she would have spent $49050 and to buy, $53235. So, if the property value doesn't increase value, Renting would have been a better option.
