Question

Mika wants to buy a condominium. He has the choice of buying it now or renting it with the option to buy at the end of 3 years. If he buys now, he could put $0 down, but he must pay closing costs of $7,100. His monthly mortgage payment will be $675. Mika decides to rent instead of buy because it is the cheapest option over the first 3 years. His move-in costs are one month's rent and a $750 security deposit, and he would still need to pay his first month's rent on top of these move-in costs. To the nearest dollar, what is the maximum amount of monthly rent payment he could pay? a. $636 b. $654 c. $828 d. $851 Please select the best answer from the choices provided A B C D

Answer 1

Answer:

C) $828

Explanation:

in three years Mika will pay:

closing costs + 36 monthly payments = $7,100 + ($675 x 36) = $7,100 + $24,300 = $31,400

his move in costs are $750 + 1 month rent, so:

$750 + 37R = $31,400            where R = rent per month

37R = $30,650

R = $30,650 / 37 = $828