Question

- Jenny bought a rental property for $1,000,000 and leased it for 24 months. Rents will be collected at the beginning of each month and the residual value after 24 months will be $800,000. To earn 24% rate of return per year on this lease, how much rent/month should be charged?

Answer #1

**Answer
-**

**Step - (1) -
Information Given :-**

Cost of rental property = **$1000000.**

Lease term = **24 months.**

Monthly rate of return = (24% / 12) = **2%.**

Residual value = **$800000**.

.

**Step - (2)
-** **Calculation of the amount of monthly
lease payments :-**

= [Cost of rental property - Present value of residual value] /
PVAF of $1 _{(i%, n)}

= [$1000000 - $800000 * PVIF of $1 _{(i%, n)}] / PVAF of
$1 _{(i%, n)}

= [$1000000 - $800000 * PVIF of $1 _{(2%, 24)}] / PVAF
of $1 _{(2%, 24)}

= [$1000000 - ($800000 * 0.62172)] / 18.9139

= ($1000000 - $497376) / 18.9139

= **$26574**

Therefore, the
amount of rent per month should be charged =
**$26574.**

Jenny bought a rental property for $1,000,000 and leased it for
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