Question

Geena can rent an apartment for $850 per month or she can buy a house for $175,000 at 3.875% interest for 30 years. How much will each housing choice cost for one year?

A. Price of Renting:
B. Price of Buying:

Answer 1

Using simple interest, it is found that the prices are as follows:

A. $10,200.

B. $12,614.58.

Simple Interest

Simple interest is used when there is a single compounding per time period.

The amount of money after t years in is modeled by:

$A(t) = A(0)(1 + rt)$

In which:

• A(0) is the initial amount.

• r is the interest rate, as a decimal.

Item a:

$850 for 12 months, hence the yearly cost is:

P = 850 x 12 = $10,200.

Item b:

The total cost is found using simple interest with A(0) = 175000, t = 30, r = 0.03875, hence:

A(t) = A(0)(1 + rt)

A(30) = 175000[1 + 0.03875(30)]

A(30) = 378437.5.

The yearly cost is given by:

378437.5/30 = $12,614.58.

More can be learned about simple interest at https://brainly.com/question/25296782