Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 2

Suppose you buy a home for $200,000,using your own funds. The annual interest rate you could earn by investing your funds elsewhere is 5%. (Ignore any sales commissions or fees associated with buying or selling a home.)a. If the price at which you could sell the home remains at $200,000,what is your annual interest cost of home ownership?
b. Suppose that,after a few years of owning,home prices rise dramatically,and you can now sell your home for $300,000. If you continue to own,what is your annual interest cost now?
c. Suppose once again that,after a few years of owning,you can now sell your home for $300,000. But the interest rate you could earn by investing your funds elsewhere has risen to 7%. If you continue to own,what is your annual interest cost now?