Question

Say you buy an house as an investment for 350000$ (assume that you did not need a mortgage). You estimate that the house will increase in value continuously by 43750$ per year. At any time in the future you can sell the house and invest the money in a fund with a yearly interest rate of 5% compounded quarterly.

If you want to maximize your return, after how many years should you sell the house? Report your answer to 1 decimal place.

years=

Answer 1

Answer:

37500 /52 weeks = 721.154 per week increase in value

keep for x weeks

V = 300,000 + 721.154 x

interest rate r = .055/52 = 0.001057

when is interest per week equal to increase in value per week?

interest per week = 0.001057 V

so

0.001057 ( 300,000 + 721.154 x) = 721.154