The purchase price for a new home was $400,000. The buyer put down 20% and the balance was a mortgage for 80% of the purchase price. The appraised value at the time of closing was $415,000 and the assessed value was $417,000. What will the buyer pay for one year's property taxes if the tax rate is 3.5%?

Rationale

The buyer will pay $14,595 for one year's property taxes.

To calculate the property taxes, we multiply the assessed value of the home by the tax rate. Here, the assessed value is $417,000 and the tax rate is 3.5%, resulting in a tax amount of $14,595.

A (14,000) YOUR ANSWER

This choice incorrectly calculates the property taxes, potentially assuming a lower assessed value or tax rate. It does not reflect the correct multiplication of the assessed value ($417,000) by the tax rate (3.5%).

B (11,200) YOUR ANSWER

This option suggests an even lower calculation of property taxes, which might result from a miscalculation or misunderstanding of the tax rate application. The assessed value multiplied by the tax rate clearly exceeds this amount.

C (14,595) CORRECT

This choice accurately reflects the calculation of property taxes based on the assessed value of $417,000 and a tax rate of 3.5%. The calculation yields $14,595, making this the correct answer.

D (14,530) YOUR ANSWER

This figure is close but still incorrect, possibly resulting from a rounding error or a miscalculation in applying the tax rate to the assessed value. The exact product of the assessed value and the tax rate does not match this option.

Conclusion

The calculation of property taxes is straightforward when using the assessed value of the home and the specified tax rate. In this case, the buyer, using an assessed value of $417,000 at a tax rate of 3.5%, correctly calculates a total property tax of $14,595. This confirms the importance of accurate assessment values and tax rates in financial planning for homeownership.

The buyer will pay $14,595 for one year's property taxes.

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