exercise:08ce3e949f: Difference between revisions
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*The rent on the apartment was adjusted at the start of each year and grew at a constant annual rate | *The rent on the apartment was adjusted at the start of each year and grew at a constant annual rate | ||
Using only the information above (ignore all other expenses), approximate the annual rate of return for this real estate investment. | Using only the information above (ignore all other expenses), approximate the effective annual rate of return for this real estate investment. | ||
<ul class="mw-excansopts"> | <ul class="mw-excansopts"> | ||
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<li>24.26%</li> | <li>24.26%</li> | ||
</ul> | </ul> | ||
{{alert-warning | This exercise is too difficult and created for educational purposes only}} | |||
Latest revision as of 23:22, 13 April 2024
You are given the following information about the purchase of a home:
- The home was purchased on Jan 1 2010 for $300,000
- The buyer used a 10-year mortgage to purchase the home with a down payment of $100,000
- The nominal interest rate for the mortgage is 4%, payable at the end of every month
- The buyer sold the home at the end of 2014 for $440,000
- If the buyer hadn't purchased the home, he would have rented a three bedroom apartment. The monthly rent for a three bedroom apartment, payable at the beginning of the month, was $1,300 on Jan 1 2010 and $1,800 on Jan 1 2015
- The rent on the apartment was adjusted at the start of each year and grew at a constant annual rate
Using only the information above (ignore all other expenses), approximate the effective annual rate of return for this real estate investment.
- 15.26%
- 18.26%
- 20.26%
- 22.26%
- 24.26%
This exercise is too difficult and created for educational purposes only