One important decision decisions that many of you will make in the upcoming years is how you are going to solve your housing situation. Suppose that you are moving to a city like Oslo, since you have secured a well-paid job as BI analyst, the employment is 4 years (48 months) so you will have to stay in the apartment you chose for that amount of time. In Oslo you find two suitable options:
1. Buy an apartment for 1000000 kr, rent is 1500 kr/Mo, initial down payment on mortgage is 150000 kr.
2. Rent an apartment for 8500 kr/Mo
To both these options there are some constraints which you will have to take into account when making your decision.
Buying:
• When you sell your apartment you will have to pay the housing agent a fixed cost of 10000 kr + 3% of the selling price
• You estimate that there is a 25% probability that the value of the apartment will increase 10% in value, 25% probability that the apartment will decrease 10% in value, 50% probability that the value will remain unchanged after 4 years.
Renting:
• For practical reasons you will have to pay one extra month of rent at the end of the 4 year contract.
• Every 12 month the rent will increase 5%
Details on mortgage:
• You must make at least a 15% down payment on the mortgage
• The base rate interest on the bottom of mortgage (0%-75%) is currently 1.5%
• The top-up loan (the 75%-100% of the mortgage) has an interest of 3.5%. This part of the mortgage is fixed at 2% higher than the base rate interest.
• Yearly you repay exactly 2% of the total mortgage in amortization.
• Every 12 months you estimate that there is a 25% probability that the base rate will increase 0.5%, 25% probability that the base rate will decrease 0.5%, and 50% probability that it will remain unchanged.
• All interests are specified in years but you pay monthly. Meaning that the (monthly interest) = (yearly interest)/12
Your task is to construct an excel-sheet to aid you in the decision making. These are some of the questions which you will have to answer:
1. What will renting the apartment cost after 4 years?
2. What is the best case scenario if buying the apartment after 4 years? How probable is this scenario?
3. What is the worst case scenario if buying the apartment after 4 years? How probable is this scenario?
4. What is the expected cost on buying the apartment?
5. How is questions 2-4 changed if you instead make a down payment of 350000 kr?
Finalize this lab by writing a report on your results, also provide the excel-sheet which you have constructed. In the report your solution should be well explained and all results should be motivated clearly. If you make any assumptions you must motivate them. This is an important skill as a BI analyst will have to be able to prove to an employer that the reasoning behind results is valid.

One important decision decisions that many of you will make in the...