Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Q1) Kim and Dan Bergholt are both government workers. They are thinking of buying a home in Washington D.C. area for about $280,000. They evaluate monthly expenses for utilities at $220, maintenance at $100, property taxes at $380, and home insurance payments at $50. Their only debt comprises of car loans requiring a monthly payment of $350.

Kim's gross income is= $55,000/year and Dan's is $38,000/year. They have saved about $60,000 in money market fund on which they earned $5,840 last year. They plan to use most of this for 20% down payment and closing costs. Lender is offering 30-year variable rate loans with the initial interest rate of 8% given 20% down payment and closing costs equal to $1,000 plus 3 points.

Before making purchase offer and applying for this loan, they would like to have some idea whether they might qualify.

Real estate agent tells Bergholts that if they do not care to buy, they might consider renting. Rental option would cost $1,400/month plus utilities evaluated at $220 and renter's insurance of $25/month. Bergholts believe that neither of them is probable to be transferred to another location within next five years. After that, Dan perceives that he might move out of government service into private sector. Suppose they remain in same place for the next five years, the Bergholts would like to know if it is better to buy or rent the home. They expect that price of housing and rents will rise at annual rate of 3% over next five years. They expect to earn annual rate of 5% on money market fund. All other prices, comprising utilities, maintenance, and taxes are expected to increase at 3% annual rate. After federal, state, and local taxes, they get to keep only 55% of marginal dollar of earnings.

Evaluate whether it is financially more attractive for Bergholts to rent or to purchase home over five-year holding period. (Suppose contract interest rate of 8%, monthly interest payments over five-year period would total $87,574.)

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919520

Have any Question? 


Related Questions in Accounting Basics

Assignment - you are an investment analystas the cfo of

Assignment - You Are an Investment Analyst As the CFO of your corporation, you are in charge of preparing and analyzing financial statements that will be presented to potential investors and creditors. However, before yo ...

1 ahn nguyen a vietnamese joint stock company has net

1. Ahn Nguyen, a Vietnamese Joint Stock Company has net income of 52,000 Vietnamese Dong, () and the following items: Depreciation Expense   16,000 Accounts Receivable Increase                    12,000 Inventory Decreas ...

1 regarding the ottoman territories during the period

1. Regarding the Ottoman territories during the period immediately following World War I, which of the following statements is false? A. Defying Allied pressure, the Turkish sultan supported Kemal. B. In 1921, Greek forc ...

Question 1the company you work for has a large amount of

Question 1 The company you work for has a large amount of disposable cash and very little debt on its books. The board of directors has expressed an interest in taking this money and investing in equity and debt securiti ...

Consider that a company has excess cash flow google is a

Consider that a company has excess cash flow. Google is a good one to look at. Google invests in short term securities to earn something on the cash. What is another way the cash could be used to create wealth for the in ...

Review the provisions of the sarbanes-oxley act of 2002 to

Review the provisions of the Sarbanes-Oxley Act of 2002 to address the accounting scandals in the late 1990s and early 2000s (Enron, WorldCom, etc.). Identify the provisions that you believe made the most significant imp ...

Assignmentbackgroundphoenix advertising with its main

Assignment Background Phoenix Advertising, with its main headquarters in Charlotte, North Carolina, serves clients that include banks, insurance companies, and retail chains. You're the vice president of human resources ...

Accounting paper1each person will write a 3 page paper

Accounting Paper 1. Each person will write a 3 page paper, single spaced, one inch margins, 12 pt font with double space between paragraphs. 2. You will also be required to include the Income Statement, Balance Sheet and ...

The budget director for bird house unlimited inc has

The budget director for Bird House Unlimited, Inc., has gathered the following data for use in developing the budgeted income statement for November 20XX. Estimated sales for November Bird House 28,600 units at $33 per u ...

Problem 1bart exchanges some real estate basis of 80000 and

Problem 1 Bart exchanges some real estate (basis of $800,00 and fair market value of $1 million) for other real estate owned by Roland (basis of $1.2 million and fair market value of $900,00) and $100,000 in cash. The re ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro