Mathematics and Economics

Mathematics and Economics
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Question One
Solution to:
Part a.
From calculations, the friend does have a problem.Your friend spends a lot more money each year than he receives .Money being spent=$10500+$15000=$25500 .Money being received=4 x $360 = $17280.There is a possibility that the monthly rent is too low.The friend is losing $ 8220 per.This is a problem.
Part b.
First option. Increase the rent. (Will the market bear an increase?).
Second option. Decrease the expenses of maintenance (do not create safety problems).
Third option. Sell out the apartment building. (Is there a possible loss).
Fourth Option. Abandon the building (this would be bad for your friend reputation).
Part c.
First option. Increase the monthly rent to $1440+$R for the four apartments to cater for monthly expenses of $ 2125.Note that the minimum increase in rent would be ($2125-$1440)/4=$171.25 per apartment each month. This is about 50% increase.
Second option. Decrease monthly expenses to $2125-$C so that these expenses are covered by the monthly revenue of $1440 per month. This would be achieved primarily by lowering maintenance cost. (Not much can be done about the annual mortgage cost unless a favorable refinancing opportunity presents i...