You Decide to Move to Nevada; Life in Southern California

question 101

Multiple Choice

You decide to move to Nevada; life in southern California is getting too expensive and you 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 2 percent; the depreciation rate of homes is 2 percent; average rent is $500; there is no expected capital gain; and you will have a 10 percent down payment. You offer the owner, rounding to the nearest dollar:

• A) $41,667.
• B) $333,333.
• C) $22,727.
• D) $4,000.
• E) $71,429.

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