Question

Teresa rents her apartment for ​$860 per​ month, utilities not included. When she moved​ in, she paid a ​$700 security deposit using money from her savings account that was paying 3​% interest. Her​ renter's insurance costs her ​$84 per year. What are​ Teresa's total annual costs of​ renting?

Answer 1

$10,425

Step-by-step explanation:

Teresa's annual cost of renting:

• rent x 12 months = $860 x 12 = $10,320
• annual renter's insurance = $84
• implicit costs = lost interests = $700 x 3% = $21

total $10,425

The $700 she left as security deposit should be returned to her at the end of the lease contract, so only the interest lost is considered a cost.

Answer 2

$11,125

Step-by-step explanation:

The total annual cost of renting is the total amount the tenant spends to be able to rent the apartment which includes the annual rent, the security deposit, the interest lost on the money used for the security deposit and the insurance cost.

Annual cost of renting= ($860*12)+$700+($700*3%)+$84

Annual cost of renting= $10,320+$700+$21+$84

Annual cost of renting= $11,125