Suppose you purchase a new home for $150 000,making a down payment of 10% 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 decreases by 20%?

Question

Quizplus · Accepted Answer

The initial investment (down payment) is $15,000 (10% of $150,000). If the home value decreases by 20%, the new value is $120,000. The mortgage balance remains $135,000, so the equity is now -$15,000. The loss on the initial investment is $30,000, which is a -200% return on the $15,000 investment.

Suppose You Purchase a New Home for $150 000,making a Down