You Decide to Move to the Mountains of Colorado and Want

question 84

Multiple Choice

You decide to move to the mountains of Colorado and want to know what would be a good offering price on a home, but you know you will only own it a year. Fortunately, you are armed with the simple residential investment equation. You have the following information: the real interest rate is 4 percent; the depreciation rate of homes is 5 percent; average rent is $1,000; there is no expected capital gain; and you will have a 20 percent down payment. You offer the owner, rounding to the nearest dollar:

• A) $25,000.
• B) $125,000.
• C) $4,167.
• D) $17,241.
• E) $50,000.

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