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QUESTION

# On January 1, Pete Rowe bought a ski chalet for \$57,500. Pete is renting the chalet for \$68 per night. He estimates he can rent the chalet for 180...

On January 1, Pete Rowe bought a ski chalet for \$57,500. Pete is renting the chalet for \$68 per night. He estimates he can rent the chalet for 180 nights. Pete's mortgage for principal and interest is \$461 per month. Real estate tax on the chalet is \$630 per year. Pete estimates that his heating bill will run \$70 per month. He expects his monthly electrical bill to be \$15 per month. He pays \$11 per month for cable television.

a. What is Pete's return on the initial investment for this year? (Round your answer to the nearest tenth percent.)

Pete's return            %

b. Assume rentals drop by 25% and monthly bills for heat and electricity drop by 15% each month. What would be Pete's return on initial investment? (Round your answer to the nearest tenth percent.)

Pete's return            %