You purchased a home worth $400,000, with the help of a $300,000 mortgage. Your levered equity ownership is, in effect,

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Levered equity ownership is essentially owning a call option with a strike price equal to the amount of the mortgage. This is because the owner has the right, but not the obligation, to buy the property from the mortgage lender for the amount of the mortgage. Therefore, the correct choice is C, a call option with a strike price of $300,000. Levered equity ownership is the ownership position of a homeowner after taking out a mortgage. It is essentially the value of the home minus the outstanding mortgage balance. Therefore, in this case, the levered equity ownership is $100,000 ($400,000 - $300,000). This can be seen as a call option with a strike price of $300,000, as the homeowner has the right to purchase the home for $300,000 (the remaining unpaid mortgage balance) and sell it for $400,000 (the value of the home).

You Purchased a Home Worth $400,000, with the Help of a $300,000