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What is the true return on your investment

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Question - Assume you buy a house for $510,000 and have $102,000 as a down payment. Your mortgage rate is 3 percent APR compounded semi-annually and you amortize the mortgage over 25 years with monthly payments. You will assume that you could have earned 5 percent EAR on the down payment (opportunity cost), your marginal income tax rate is 40 percent, real estate fees are 4 percent +HST, and property taxes will be $5,100 annually for this calculation. Ignore maintenance costs.

a. What is the true return on your investment if you sell it in 6 years for $815,000?

b. What is an approximate annualized rate of return on your investment?

Reference no: EM133133973

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