Nancy buys a $150,000 home using $30,000 of her own money and gets a mortgage for the remaining $120,000.If the price of the house increases 5%,what will Nancy's capital gain be?
A) $30,000
B) $31,500
C) $35,000
D) $37,500
E) $45,550

Question

Quizplus · Accepted Answer

The original value of Nancy's home is $150,000. If the price of the house increases by 5%, the new value of the home is:

$150,000 + (5% x $150,000) = $157,500

Nancy used $30,000 of her own money to buy the home, so her original equity in the home is $30,000. If the home's value increases to $157,500 and Nancy still owes $120,000 on the mortgage, her new equity in the home is:

$157,500 - $120,000 = $37,500

Therefore, Nancy's capital gain is:

$37,500 - $30,000 = $7,500

So, the best choice is D, which is $37,500.

Nancy Buys a $150,000 Home Using $30,000 of Her Own