Carol Jones, a single person, has an annualincome of $32,200. The principal and interestpayment on the $25,000 loan (30 years at 8%) forher condominium is $7.34 per $1000. Annualproperty taxes are $1,200 and insurance is $280а year.Ms. Jones would like to purchase a larger unit ina new high rise, but her monthly principal andinterest will increase to $330.30, plus annualtaxes will be $2,100. Interest on the $45,000 willbe 8% as rates are lower than when shepurchased her present condominium.Given Ms. Jones' situation, would you advise herto purchase the new home? Considering theinvestment from strictly the market place aspect- are high rise condos selling in your area?

SolutionGiven thatAnnual income of carlo jones=$32,000Loan amount =$25000 30 year at 8%Annual…

Answered: Carol Jones, a single person, has an…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 8E

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Mr Teo wants to buy a house. His annual income is $48,000. The bank is willing to lend an amount that can be serviced by monthly payments equivalent to 35% of his monthly income. The interest rate on the bank loan is 4.8% per year with monthly compounding for a 20-year fixed rate loan. The real estate agent had advised Mr Teo to set aside $10,000 for initial down payment and transaction costs. Transaction costs are estimated at 1% of the loan. At the same time, Mr Teo plans to make a series of deposits in an individual retirement account. He had hoped to deposit $10,000 today, $20,000 in two years and $30,000 in five years. The interest rate offered is 3% per annum. He is worried that his retirement plan may be affected if he uses his existing cash of $10,000 to fund the down paymentand transaction costs of the resale flat. Mr Teo’s financial planner would like to recommend that Mr Teo invest in a portfolio of small-cap equities to generate higher returns. The portfolio has a beta of…

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Carol Jones, a single person, has an annual income of $32,200. The principal and interest payment on the $25,000 loan (30 years at 8%) for her condominium is $7.34 per $1000. Annual property taxes are $1,200 and insurance is $280 а year.