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Conceptual Questions

1. 1. Flexibility, short-term living, or avoiding maintenance responsibilities.
   2. Building equity, potential appreciation, tax benefits, and long-term stability.
   3. Principal, Interest, Taxes, Insurance (PITI).
   4. Max 28% of income on housing, 36% total debt — ensures affordability.
   5. Fixed = stable payments; Adjustable = variable payments, riskier but may start lower.
   6. Mortgage payments build equity, acting like automatic savings.
   7. Repairs, HOA fees, utilities, furnishing, property taxes.
   8. Leasing offers lower payments and newer cars; good for frequent movers.
   9. Depreciation lowers resale value — buyers may lose money fast.
   10. Purchases often reflect priorities like freedom, stability, or family planning.

Problem Solving

1. 1. $7,639
   2. $23,538
   3. $348
   4. 9 years
   5. Mortgage B
   6. $20,438
   7. $110,040
   8. Interest
   9. Interest paid decreases; loan term shortens
   10. Option A

Interactive Challenge

1. 1. 12 years
   2. D) Compounded daily
   3. Mistaken — early mortgage payments mostly cover interest, not principal
   4. Bonus A
   5. Higher savings due to larger contributions and longer compounding
   6. A) Pay down the loan — reduces total interest
   7. Buying may cost less net after equity
   8. 8 years
   9. Lease
   10. Rent