Two paths, one starting budget
Compare opportunity cost and ending wealth under uncertain assumptions.
Materials: calculator page, paper or this response sheet, and a basic calculator. “Keep for comparison” preserves up to three scenarios while that calculator tab stays open.
Prepare the fictional setup
Click “Load example” in the calculator before starting. The first scenario is fictional and may intentionally show a difficult financial outcome.
Complete setup reference
| Purchase price ($) | 350000 |
|---|---|
| Down payment (%) | 20 |
| Annual loan interest rate (%) | 7 |
| Mortgage term (years) | 30 |
| Purchase closing costs (%) | 3 |
| Annual property taxes ($) | 4200 |
| Annual property insurance ($) | 1800 |
| Monthly H O A / other owner costs ($) | 0 |
| Annual upkeep as share of home value (%) | 1 |
| Selling costs at exit (%) | 6 |
| Annual home price change (%) | 3 |
| Annual tax, insurance & H O A growth (%) | 3 |
| Monthly rent ($) | 2000 |
| Monthly renter insurance ($) | 20 |
| Annual rent & renter-insurance growth (%) | 3 |
| Annual investment return (%) | 5 |
| Years until you move / sell | 10 |
Typed responses stay in this tab. Save a PDF to keep your work. Do not enter real household or student financial information.
Warm-up · 5 minutes
What could a renter do with money that a buyer uses for a down payment?
Investigate · 25–40 minutes
Step 1
Load the rent-versus-buy example and record both ending-wealth estimates after ten years.
Step 2
Explain where the renter’s initial investment comes from and how monthly savings are treated.
Step 3
Keep the scenario. Change annual home price growth from 3% to 0%. Record what changes.
Step 4
Try a three-year stay. Write a recommendation for the fictional household that names two limitations.
Discuss & reflect · 10 minutes
Why is “rent is throwing money away” an incomplete economic argument?
Extension
Find a combination of assumptions that changes which path ends ahead. Explain which assumptions the household can and cannot control.
Teacher guide and assessment
Expected reasoning
Rent buys housing services and flexibility. Ownership also has costs that do not build equity. A fair comparison includes both paths’ opportunity costs, selling costs and uncertainty; the model invests savings for either path.
Use the calculator’s breakdown to check rounding. The teacher explanation is tied to the fictional setup above, not to any learner’s edited scenario.
Quick assessment · 6 points
- 2 points: accurate calculations with units and labeled scenarios.
- 2 points: explains how changing one assumption changes the result.
- 2 points: supports a conclusion with evidence and names a limitation.
Support: work through one scenario together and use a simple table. Challenge: ask the learner to find a counterexample or solve a target by hand. These are flexible suggested grade bands, not a standards-alignment claim.
Methods & sources
Formula explanations, assumptions and source links are on the calculator page. This is an educational activity, not a recommendation to borrow, invest or make a purchase.