Question

Miguel wants to buy a condominium. He has the choice of buying it now or renting it with the option to buy at the end of 3 years. If he buys it now, it will cost him $6,000 to close and his mortgage payment will be $726 per month. If he rents, he must pay a move-in cost of one month's rent and a security deposit of $2,000.
Miguel decides to rent because it is the cheapest option over the first 3 years. To the nearest dollar, what is the maximum amount of monthly rent payment he could pay?
a.
$670
b.
$782
c.
$814
d.
$837

Answer 1

Buying cost for 3 years = 6000 + 726(36) = 6000 + 26136 = 32136.

Renting cost for 3 years = 36r (monthly rents for 36 months, including the first month paid at move-in) + 2000 (security deposit) = 36r + 2000.

Set 36r + 2000 ≤ 32136 → 36r ≤ 30136 → r ≤ 30136/36 ≈ 837.11.

To the nearest dollar the maximum monthly rent is $837. Answer: d.