Question

As a real estate​ speculator, you are planning and able to buy a house that costs​ $200,000, borrowing the full amount with no money down with the goal of selling this same property in exactly one year. Mortgage interest rates are​ 5%, and the expected increase in housing prices is​ 2%.​ (All rates and percentages are annual​ values.)What is your expected capital​ gain/loss when you flip the house in one​ year?The expected capital gain​ (or loss) is ​nothing. ​(Round your response to the nearest dollar.​)

Answer 1

The expected capital gain when you flip the house in one year is $4,000.

Step-by-step explanation:

Expected capital gain = expected increase in housing prices*cost of house

= 2%($200,000)

= $4,000

Therefore, the expected capital gain when you flip the house in one year is $4,000.