Problem
You are considering the purchase of a property today for $300,000. You plan to finance it with an 80 percent loan. The appreciation rate on the property value is expected to be 4 percent annually for the next 3 years
i. Approximate the expected annual average rate of appreciation on home equity for the next three years
ii. What if you now think that a $300,000 purchase price may be somewhat high and that if you pay this price, the expected appreciation rates in your house price will be as follows: year 1= 0%, year 2= 2%, year 3= 3%, How will your answer to part a change?