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Viola has to relocate for her job. She finds a townhome with an option to rent or buy. The conditions of each are shown below. Rent: Move-in costs of $2,380 and monthly payment of $845. Buy: Move-in costs of $5,260 and monthly payment of $785. Viola moves frequently due to her job, but she thinks that she will stay in the area for 4 years. Therefore, she decided to buy. Choose the best evaluation of Viola’s decision.

Respuesta :

Louli
I added a screenshot with the options

Answer:
Since the costs would be the same over the 4 year period, she will have made a good decision if the property value does not decrease

Explanation:
1- Renting:
Move-in costs of $2,380 and monthly payment of $845
She will stay for 4 years.
This means that:
she will stay for 4 * 12 = 48 months
Total payment = Move-in costs + 48*monthly payments
Total payment = 2380 + 48(845)
Total payment = $42,940

2- Buying:
Move-in costs of $5,260 and monthly payment of $785.
She will stay for 4 years.
This means that:
she will stay for 4 * 12 = 48 months
Total payment = Move-in costs + 48*monthly payments
Total payment = 5260 + 48(785)
Total payment = $42,940

Therefore, we can note that since payment is the same in both cases, therefore, this is not an effective factor

Other factors that might have influenced her decisions include:
1- lower monthly payments
2- having an apartment of her own 
3- she can sell the apartment at a higher price later based on the market price

Comparing this with the options we have, we would find that the best one is the first one

Hope this helps :)
Ver imagen Louli

Option A is correct. Since the costs would be the same over the 4 year period, she will have made a good decision if the property value does not decrease.

Further Explanation:

Comparing renting and buying options:

Renting:

Calculate the cost of renting for four years:

Move-in costs = $2,380

Monthly payment = $845

Total cost for 4 years:

Total cost = Move-in costs + Monthly payments

                = $2380 + (48 × $845)

                = $42,940

Buying:

Calculate the cost of buying for four years:

Move-in costs = $5,260  

Monthly payment = $785.

Total cost for 4 years:

Total cost = Move-in costs + Monthly payments

                = $5260 + (48× $785)

                = $42,940

When both options are compared, they both have the same cost for 4 years.

Therefore, the decision of Ms. V is correct if the value of the property does not decrease.

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Answer details:

Grade: Middle School

Subject: Economics

Chapter: Renting and buying

Keywords: Viola has to relocate for her job. She finds a town home with an option to rent or buy. The conditions of each are shown below. Rent: Move-in costs of $2,380 and a monthly payment of $845. Buy Move-in costs of $5,260 and a monthly payment of $785, Viola moves frequently due to her job, but she thinks that she will stay in the area for 4 years, choose the best evaluation of Viola’s decision .

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