88. The purchase price for a new home was $250,000. 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 $268,000 and the assessed value was $263,000. What will the buyer pay for one year's property taxes if the tax rate is 2%?
Answer: D
The buyer will pay $5,360 for one year's property taxes.
To calculate the property taxes, the assessed value of the home, which is $263,000, is used. The property tax is calculated by multiplying the assessed value by the tax rate of 2%, resulting in a total tax amount of $5,360.
A) 5,000
This option is incorrect because it underestimates the property taxes. If the assessed value of $263,000 is multiplied by the tax rate of 2%, the resulting tax amount is significantly higher than $5,000.
B) 4,000
This choice is incorrect as it suggests an even lower estimate of the property taxes. The calculation based on the assessed value of $263,000 clearly yields a higher tax amount than $4,000 when applying the 2% tax rate.
C) 6,260
This option is also incorrect. It overestimates the property taxes based on the assessed value. Multiplying $263,000 by 2% results in $5,360, which is considerably less than $6,260.
D) 5,360
This option is correct. The calculation of property taxes is accurately derived from the assessed value of $263,000 multiplied by the tax rate of 2%, leading to the correct total of $5,360.
Conclusion
The correct answer of $5,360 is derived from applying the tax rate to the assessed value of the home. Other options either underestimate or overestimate the property taxes, failing to account accurately for the assessed value at the specified tax rate. This demonstrates the importance of using the correct assessed value in calculating property taxes.