Answer:
Computation of Rental Costs
Particulars Amount
Rent $7,380
Insurance $145
Loss of Interest on Security Deposit <u>$39 </u> ($650*6%)
Total Rental Costs <u>$7,564</u>
Computation of Buying Costs
Particulars Amount
Annual Mortgage Payments $9,800
Taxes, Insurance and Maintenance $2,830 ($1,050+$1,780)
Loss of Interest on Down Payment $270 (4,500*6%)
Growth in Equity -$225
Annual Appreciation -$1,700
Mortgage Interest Tax Savings -$2,681 (9,575*28%)
Tax Savings from Property Taxes -<u>$498 </u> (1,780*28%)
Total Buying Costs <u>$7,796</u>
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b. Based on the cost criteria, i would recommend renting as it results in lesser cost
