As a real estate speculator, you are planning and able to buy a house that costs $200,000, borrowing the full amount with no money down with the goal of selling this same property in exactly one year. Mortgage interest rates are 5%, and the expected increase in housing prices is 2%. (All rates and percentages are annual values.) What is your expected capital gain/loss when you flip the house in one year? The expected capital gain (or loss) is nothing. (Round your response to the nearest dollar. )

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Brooklynn Shaw

4 January, 12:19

As a real estate speculator, you are planning and able to buy a house that costs $200,000, borrowing the full amount with no money down with the goal of selling this same property in exactly one year. Mortgage interest rates are 5%, and the expected increase in housing prices is 2%. (All rates and percentages are annual values.) What is your expected capital gain/loss when you flip the house in one year? The expected capital gain (or loss) is nothing. (Round your response to the nearest dollar. )

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Azaria Sweeney · Answer 1

The expected capital gain when you flip the house in one year is $4,000.

Explanation:

Expected capital gain = expected increase in housing prices*cost of house

= 2% ($200,000)

= $4,000

Therefore, the expected capital gain when you flip the house in one year is $4,000.