a parent decides to buy a two bedroom condo for 65,000 by putting 10% down and f

Question

a parent decides to buy a two bedroom condo for 65,000 by putting 10% down and financing the rest for 15 years at an annual rate of 3.5%. what is the monthly payment? one bedroom rented out to a roomTe for $400 a month. after 4 years, the parent Ella the condo for 67,000, what is the return from the investment a parent decides to buy a two bedroom condo for 65,000 by putting 10% down and financing the rest for 15 years at an annual rate of 3.5%. what is the monthly payment? one bedroom rented out to a roomTe for $400 a month. after 4 years, the parent Ella the condo for 67,000, what is the return from the investment a parent decides to buy a two bedroom condo for 65,000 by putting 10% down and financing the rest for 15 years at an annual rate of 3.5%. what is the monthly payment? one bedroom rented out to a roomTe for $400 a month. after 4 years, the parent Ella the condo for 67,000, what is the return from the investment a parent decides to buy a two bedroom condo for 65,000 by putting 10% down and financing the rest for 15 years at an annual rate of 3.5%. what is the monthly payment? one bedroom rented out to a roomTe for $400 a month. after 4 years, the parent Ella the condo for 67,000, what is the return from the investment

Explanation / Answer

(a)

For monthly payment we need to calculate EMI(equated monthly Installment)

10% is down payment and for remaining the loan is taken. Thus, $6,500 is down payment and 58,500 has been taken as loan for 15 years @ 3.5%.

EMI = [P X R X (1+ R)n] / [(1+ R)n - 1 ]

       =[ 58,500 x 0.035 X ( 1 + 0.035)15] / [(1 + 0.035)15 - 1]

       = $ 5,079.27

(b)

For finding return from the Investment, we will calculate holding period return (HPR)

HPR = [(400 X 12 X 4 ) + (67,000-65,000)] / 65,000

       = 32.62%

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