Suppose you purchase a new home for $250 000,making a down payment of 25% and taking out a mortgage on the balance.What is the return on your investment in your home if one year later the price of your home increases by 30%?

Question

Quizplus · Accepted Answer

The initial investment is the down payment, which equals 25% of $250 000, or $62 500. To calculate the return on investment, we need to calculate the increase in value of the home after one year, which is 30% of $250 000, or $75 000. Therefore, the total value of the home after one year is $250 000 + $75 000, or $325 000. The return on investment is then calculated as the increase in value divided by the initial investment, or ($325 000 - $250 000)/$62 500 = $75 000/$62 500 = 1.2, or 120%. Therefore, the correct choice is D.

Suppose You Purchase a New Home for $250 000,making a Down