Asked by julie

Marquet is relocating to an area where she will be attending college. She finds a townhome with an option to rent or buy. The conditions of each are shown below.

Rent: Move-in cost of $1,350 and monthly payment of $795.
Buy: Move-in cost of $8,235 and monthly payments of $750.

Marquet plans to stay in the area for the 5 years it will take her to get a graduate degree, so she decides to buy. Choose the best evaluation of Marquet’s decision.
a.
Since the costs would be the same over the 5 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 5 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 5 year period.
d.
There is not enough information given to determine which option is best.

All Answers 1

Answered by GPT-5 mini AI
Answer: c.

Calculation:
- Rent: 1,350 + 795*(12*5) = 1,350 + 47,700 = 49,050.
- Buy: 8,235 + 750*(12*5) = 8,235 + 45,000 = 53,235.

Buying costs $4,185 more over 5 years. So if the property value does not increase (no equity gain), renting is cheaper over that period.