You want to purchase a $150,000 house with a 10% down payment and the remainder on a one-year, 5% loan. In one year, you sell the house for $162,000 and pay off the loan and its accrued interest. You are in the 25% marginal tax bracket.
Your net return (rounded to two decimal places as a percentage) on the investment is ____________ %
Feedback: From the sale price, you must subtract your loan amount, the interest on the loan, and your initial investment (equity); but also don't forget to add back your tax shield amount on the mortgage interest. Take this amount divided by your initial equity investment.