AEM 4620: Advanced Financial Modeling and Analysis
\nCase 1 \u2013 Time Value of Money: The Buy versus Rent Decision
\n(13 points total)
\n1. (0.5 pts) Determine the required monthly payments for the mortgage.
\n2. (0.5 pts) Determine the \u201copportunity\u201d costs, on a monthly basis, of using the required funds for
\nclosing (i.e., down payment plus all closing costs), rather than leaving those funds invested and
\nearning the monthly effective rate (assumed to be equivalent to the mortgage rate).
\n3. (0.5 pts) Determine the additional monthly payments required to buy the condominium
\ncompared to renting (including opportunity costs).
\n4. (1.5 pts) Determine the principal outstanding on the mortgage after:
\no Two years
\no Five years
\no Ten years
\n5. Determine the \u201cnet\u201d future gain or loss after two, five, and ten years under the following
\nscenarios:
\no (2 pts) The condo price remains unchanged.
\no (2 pts) The condo price drops 10% over the next two years, then increases back to its
\npurchase price by the end of five years, then increases by a total of 10% from the
\noriginal purchase price by the end of 10 years.
\no (2 pts) The condo price increases annually by the annual rate of inflation of 2% per year
\nover the next 10 years.
\no (2 pts) The condo price increases annually by an annual rate of 5% per year over the
\nnext 10 years.
\n6. (2 pts) As Rebecca Yong, what decision would you make? Describe any qualitative
\nconsiderations that could factor into your decision.
\nAEM 4620: Advanced Financial Modeling and Analysis
\nCase 1 – Time Value of Money: The Buy versus Rent Decision
\n(13 points total)<\/p>\n","protected":false},"excerpt":{"rendered":"
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