Question

12

12

Francis Bacon and his wife purchased a condominium on the beach for $235,000.

They made a $40,000 down payment. Their annual expenses were mortgage

interest of $11,700, depreciation of 3% of the purchase price of the house, and

taxes, repairs, and insurance of $15,430. They rented the condo for $3,000 per

month. What is the annual yield?

(A) 1.52%

(C) 3.62%

(B) 2.55%

(D) 4.55%

Answer 1

D) 4.55%

Explanation:

Given:

Rented Income = $3000 per month

= $3000 * 12 = $36,000 annually

Less : - Annual expenses = $11700

Depreciation(3% OF 235000) = $7050

Tax, repairs and Insurance = 15430

Annual net income = $36,000 - ($11,700+$7,050+$15,430)

= $36,000 - $34,180

Annual net income = $1,820

To find annual yield, use the formula below:

Annual yield = (annual net income/down payment) * 100

Therefore, annual yield will be:

Annual yield
`= (1,820)/(40,000) * 100`

= 0.0455 * 100

= 4.55%

Annual yield = 4.55%