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Calculate the equity each of these people has in his or her home:a. Fred just bought a house for $200,000 by putting 10% as a down payment and borrowing the rest from the bank.b. Freda bought a house for $150,000 in cash, but if she were to sell it now, it would sell for $250,000.c. Frank bought a house for $100,000. He put 20% down and borrowed the rest from the bank. However, the value of the house has now increased to $160,000 and he has paid off $20,000 of the bank loan.

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Chapter 17

Financial Markets

Introduction

How Markets Work

Topics for Further Study

Rechel F.

February 15, 2022

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Hello Today we're going to look at a problem where we have three individuals who has borrowed or be off the amount that they have to buy homes. And we've seen us to find the equity that each person has in their home. So we have Fred, who's bought a house off $200,000. I paid 10% as down payment and boring the rest from bank Be a Frieda who has be 100 and $50,000 for her whole and that mountains all in cash. Uh, and then we have the home's resale value go up to $250,000. And then, lastly, we have Frank, who's brought his home for $100,000 by paying 20% in down payment and boring the rest from the back. However later, his home's resale value has increased $260,000 and he has also repaid $20,000 that he had borrowed. So first we'll take a look at what does equity in a hole and a hole for person mean? So all there's equity or this quickly really prefer that has P is monetary value that Horton gets after wrapping all of the amount of those border to buy that whole or to buy that ask right. So monetary value after resale, minus what was brought applying this to our example, but from it really has a home for $200,000. He paid 10% of the amount and borrowed the rest from bank. We've not been given any information on this on the resale value or changes in the recently so we'll assume that his recent value means the same. So Fred Whole Fred's home has, ah, value off and mind you. This is one of the value $200,000 keys for around 90% because he beat 10% down payment. So the dead person around Freeman stand to think of $200,000 kids credit cards dollars, and the rest was for right. So rested borrowed that this equal is $150,000. Rivers you practice Resale value is the same as what he bought the whole four. So freezing equals value equals 200. Now, equity therefore become the monetary value after he said, which is $200,000. Minus four tables was born, so he had born $180,000 from the back. So effectively phoners angry or equity in the zone. It's pretty $1000. Now let's get to that. The second case off feta value. Oh, this witness here we don't home value is $100,000. Sorry, $150,000. And she's bought all of been brash rights, all in cash. Therefore, she literally has no borrowings. Water amount. He was Tzeitel. And we know that her resale value goes up. So the new resale value off the whole receive equals $250,000. Hey, Frieda's equity e equal resale value minus one of us was borrowed. Not this equals $250,000 minus seal. And that, lastly we'll take a look at Frank's case. The Frank similar to Fred, what is whole, uh, by being 20% down payment. So his home's value, uh, is around $100,000 keeping pretty person down. This equals $20,000. And he brother, so 80% was born. It's $80,000. Now read Ron. What happened was frank home value appreciated that this is it, Rose and it became a resale value off $150,000. He also repaid around $20,000 off what he had border, so the border amount would decrease from $1000. I miss what he really debate, among which is $1000 Chris equals $1000. This border town goes down. Now his equity will be releasing a value of minus. What about all those? Border resale value is $160,000 he had borrowed $50,000 so effectively his equity Rick owns $100. I hope we see examples help you understand owner's equity and how we can calculate owner's equity under different conditions. Thank you.

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