Respuesta :
a. The total rental cost is $7,564.
b. Total Purchase Price: $7,796
Based on the calculations, it is preferable to rent the property since it results in a lower cost.
Is it preferable to purchase or rent?
Renting gives you a lot more freedom. However, if you've returned to the workplace, either full-time or part-time and expect to stay for a few years, purchasing may be a better option. A decent rule of thumb is that if you want to stay in the home for five to seven years, purchasing is a wise choice.
a.
Total rental costs = $8,535
Total buying costs = $7,952
b. Buying
Rental Costs
Rent $8,230
Insurance $230
After-tax interest lost on security deposit:
=After-Tax Interest rate × Security deposit
=0.07 × $1,075 = $75
$8,230 + $230 + $75 = $8535
Buying Costs
Mortgage payments of $10,450
Taxes, insurance, and maintenance $4,020
After-tax interest on the down payment is lost, and closing fees are $360.
After-tax interest lost on a down payment, closing costs:
=After-Tax Interest rate × Down payment and closing costs
=0.07 × $5,150 = $360
Growth in equity −450
Annual appreciation −2,550
Tax savings for mortgage interest −3,200
Tax savings for mortgage interest:
=Tax rate × Mortgage interest
=0.32 × $10,000 = $3,200
Tax savings for property taxes −678
Tax savings for property taxes:
=Tax rate × Property taxes
=0.32 × $2,120 =$678
$10,450 - $3,200 - $678 + $360 + $2,120 + $1,900 - $2,550 -$450 = $7,952
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