Miguel wants to buy a condominium. He has the choice of buying it now or renting it with the option to buy at the end of 3 years. If he buys it now, it will cost him $6,000 to close and his mortgage payment will be $726 per month. If he rents, he must pay a move-in cost of one month's rent and a security deposit of $2,000. Miguel decides to rent because it is the cheapest option over the first 3 years. To the nearest dollar, what is the maximum amount of monthly rent payment he could pay

Accepted Solution

For buying, the total cost will be $6,000 at the start, and over the 36 months, $726/months, so this gives a total of 6000 + 36(726) = $32,136.
For renting, the one-timme security deposit is $2,000, and over the next 36 months, he will pay $x/month. The total cost would be 2000 + 36x.
If this is less than the cost of buying:
2000 + 36x < 32136
36x < 30136
x < $837.11
Therefore, the maximum monthly rent is $837.