Question

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.
a.
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.
b.
She made a fairly good decision. Buying the townhome will be cheaper over the 4 year period as long as she doesn’t have major repairs to make.
c.
She made a poor decision if the property value does not increase. Renting the townhome would be cheaper over the 4 year period.
d.
There is not enough information given to determine which option is best.

Answer 1

Compute totals for 4 years (48 months):

- Rent: 2,380 + 845(48) = 2,380 + 40,560 = 42,940
- Buy: 5,260 + 785(48) = 5,260 + 37,680 = 42,940

The out‑of‑pocket costs given are the same, so buying is at least as good as renting provided the property value does not fall (if it holds its value or rises, she won’t be worse off). Choice (a) is correct.

(That conclusion assumes no additional selling/transaction costs, taxes, major repairs, or other unlisted expenses.)