Connect Chapter 17 - Problems

Suppose Shaan invested just $10,000 of his own money and had a $90,000 mortgage with an interest rate of 8.5 percent. After three years, he sold the property for $120,000. (a) What is his gross profit? (b) What is his net profit or loss? (c) What is the rate of return on investment?

(a) Gross Profit: $ (b) Net Loss: $2,950 (c) Percent Return on Investment: -29.5%

Assume Juan bought 50 ounces of gold for $1,750 as protection against rising inflation. He sold half the gold in 1980 at a price of $800 an ounce. Juan sold the other half in 1982 when the price was $400 an ounce. What was Juan's profit in 1980 and in 1982?

-Juan's Profit in 1980: $19,125 -Juan's Profit in 1982: $9,125

Audra owns a rental house. She makes mortgage payments of $600 per month, which include insurance, and pays $1,800 per year in property taxes and maintenance. Utilities are paid by the renter. (Ignore any tax effects.) How much should Audra charge for monthly rent to cover her costs?

Charge for Monthly Rent to Cover Costs: $750

Assume your home is assessed at $200,000. You have a $150,000 loan for 30 years at 6 percent. Your property tax rate is 1.5 percent of the assessed value. In year one, you would pay $9,000 in mortgage interest and $3,000 in property tax (1.5 percent on $200,000 assessed value). What is the total deduction you can take on your federal income tax return?

Federal Income Tax Deduction Amount: $12,000

Assume your home is assessed at $200,000. You have a $150,000 loan for 30 years at 6 percent. Your property tax rate is 1.5 percent of the assessed value. In year one, you would pay $9,000 in mortgage interest and $3,000 in property tax (1.5 percent on $200,000 assessed value). Assuming you are in a 28 percent tax bracket, by what amount would you have lowered your federal income tax?

Federal Income Tax Reduction Amount: $3,360

Assume Juan bought 50 ounces of gold for $1,750 as protection against rising inflation. He sold half the gold in 1980 at a price of $800 an ounce. Juan sold the other half in 1982 when the price was $400 an ounce. What would Juan's profit have been if he had sold all of his gold in 1980?

Juan's Profit: $38,250

Audra owns a rental house. She makes mortgage payments of $600 per month, which include insurance, and pays $1,800 per year in property taxes and maintenance. Utilities are paid by the renter. What should Audra charge for monthly rent to make $1,000 profit each year?

Monthly Rent Charged for Desired Profit: $833

Prema purchased 15 ounces of gold in 2005 for $422 per ounce in order to try to diversify her investment portfolio. She sold a third of her holdings in gold in 2009 at a price $944 per ounce. She sold the rest of her gold holdings in 2010 for $1,254 per ounce. What is Prema's profit in 2009 and 2010?

Prema's Profit: -2009: $2,610 -2010: $8,320

Prema purchased 15 ounces of gold in 2005 for $422 per ounce in order to try to diversify her investment portfolio. She sold a third of her holdings in gold in 2009 at a price $944 per ounce. She sold the rest of her gold holdings in 2010 for $1,254 per ounce. What would her profit have been if she sold everything in 2010?

Profit: $12,480

Prema purchased 15 ounces of gold in 2005 for $422 per ounce in order to try to diversify her investment portfolio. She sold a third of her holdings in gold in 2009 at a price $944 per ounce. She sold the rest of her gold holdings in 2010 for $1,254 per ounce. What would her profit have been if she sold all the gold holdings in 2009?

Profit: $7,830

Felice bought a duplex apartment at a cost of $150,000. Her mortgage payments on the property are $940 per month, $121 of which can be deducted from her income taxes. Her real estate taxes total $1,440 per year, and insurance costs $900 per year. She estimates that she will spend $1,000 each year per apartment for maintenance, replacing appliances, and other costs. The tenants will pay for all utilities. What monthly rent must she charge for each apartment to break even?

Rent per Apartment to Break Even: $651

Felice bought a duplex apartment at a cost of $150,000. Her mortgage payments on the property are $940 per month, $121 of which can be deducted from her income taxes. Her real estate taxes total $1,440 per year, and insurance costs $900 per year. She estimates that she will spend $1,000 each year per apartment for maintenance, replacing appliances, and other costs. The tenants will pay for all utilities. What must she charge to make $2,000 in profit each year?

Rent per Apartment: $735

Dave bought a rental property for $200,000 cash. One year later, he sold it for $240,000. What was the return on his $200,000 investment?

Return on Investment: 20%

Rani bought a rental property for $100,000 with no borrowed funds. Later, she sold the building for $120,000. What was her return on investment?

Return on Investment: 20%

Dave bought a rental property for $200,000 cash. One year later, he sold it for $240,000. Suppose Dave invested only $20,000 of his own money and borrowed $180,000 interest-free from his rich father. What was his return on investment?

Return on Investment: 200%