Recall the Application about the number of homeowners in the year 2012 who owed more on their homes than their homes were worth to answer the following question(s). To assist homeowners who are behind on their payments and may eventually lose their homes to foreclosure, many in Congress have advocated for reduction on the amount of money they actually owe-or principal reduction. The hope is that with a reduction in the amount they owed they would start making timely payments on their mortgages and avoid a messy default.
-Recall the Application. Assume that immediately before the housing bubble burst, you purchased a $250,000 home and took out a $225,000 mortgage to make the purchase. When the bubble burst, the value of your home fell by 20 percent. The value of the home is now ________ and you owe the mortgage company ________.
A) $200,000; $225,000
B) $180,000; $225,000
C) $200,000; $180,000
D) $180,000; $200,000

Question

Quizplus · Accepted Answer

The value of the home after a 20% decrease from $250,000 is $200,000 (250,000 - 20% of 250,000 = 200,000). The mortgage amount owed remains the same at $225,000, as it is not affected by the change in the home's value.

Recall the Application About the Number of Homeowners in the Year