Cliff Arthur has equally attractive job offers in Miami and Los Angeles. The rent ratios in the cities are 8 and 20, respectively. Cliff would really like to buy rather than rent a home after he moves. Explain how to interpret the rent ratio and what it tells Cliff about the rela- tive attractiveness of moving to Miami rather than Los Angeles, given his stated goal. 
 cc. Using the maximum ratios for a conventional mortgage, how big a monthly payment could the Taylor family afford if their gross (before-tax) monthly income amounted to $3,500? Would it make any difference if they were already making monthly installment loan pay- ments totaling $750 on two car loans?

Cliff Arthur has equally attractive job offers in Miami and Los Angeles. The rent ratios in the cities are 8 and 20, respectively. Cliff would really like to buy rather than rent a home after he moves. Explain how to interpret the rent ratio and what it tells Cliff about the rela- tive attractiveness of moving to Miami rather than Los Angeles, given his stated goal. 


cc. Using the maximum ratios for a conventional mortgage, how big a monthly payment could the Taylor family afford if their gross (before-tax) monthly income amounted to $3,500? Would it make any difference if they were already making monthly installment loan pay- ments totaling $750 on two car loans? 


dd. Find the monthly mortgage payments on the following mortgage loans using either your calculator or the table in Exhibit 5.5:
a. $90,000 at 6.5 percent for 30 years
b. $125,000 at 5.5 percent for 20 years 
c. $97,500 at 5 percent for 15 years 


ee. Use Worksheet 5.2. Aurelia Montenegro is currently renting an apartment for $725 per month and paying $275 annually for renter’s insurance. She just found a small townhouse she can buy for $185,000. She has enough cash for a $10,000 down payment and $4,000
in closing costs. Aurelia estimated the following costs as a percentage of the home’s
price: property taxes, 2.5 percent; homeowner’s insurance, 0.5 percent; and maintenance, 0.7 percent. She is in the 25 percent tax bracket. Using Worksheet 5.2, calculate the cost of each alternative and recommend the least costly option—rent or buy—for Aurelia.