For this project you will compare two housing options. For each option, make a cash flow statement and determine the balances of your CD account over the next four years. Below are some assumptions on your financial situation.

• On 7/31/2020, you have $50,000 in a special CD account (similar with savings account) specifically for your housing related transactions, which has a 2.4% annual interest rate compounded annually.

• You have allocated $1,800 of your pre-tax monthly income for housing purposes, which you can use to pay for either housing option. The unspent amount will be deposited in the CD account.

• Interests from CD account are taxable income.

• You rent an apartment
• The rent will be $800 month for the year starting on 8/1/2020, and it will inflate by every August thereafter.

• You buy a duplex for $180,000 ($130,000 for building and $50,000 for land) on August 1st. 2020. You pay payment and take a 30-year fixed rate mortgage loan at 3.8% APR for the other
So". You also buy 2 points to further reduce the mortgage rate. Closing fees are S3,000.

• After you purchase the duplex. you move into one (about the same size of the apartment in the renting option) of the house and rent out the other unit for the same pace as your renting option-

• Casualty insurance and property taxes are. respectively. $720 and S3.600 per year for the year starting on $1,2020, and inflate by 6% per year thereafter.

• Debt interests, property taxes, depreciation, and casualty insurance for the half of the house that you rent out are tax deductible, but casualty insurance for the half you that in is not. Your combined state and federal income tax rate is 33%.

• You will in the house for 4 years and then sell it on August 1st, 2024. The house will appreciate at 2% per year. You will pay a 6% realty fee, and incur an additional 3% in "fix-up" expenses when you sell it. • Assume that there are no taxes on the gams from selling your house (as you Will do a tax- free exchange). After paying off the loan with a balloon payment, you deposit all proceeds from sales of the house into your savings account.