Assume That Houses in an Area Appreciate at the Rate

question 31

Multiple Choice

Assume that houses in an area appreciate at the rate of 4 percent a year. A borrower expects to have a loan-to-value ratio of 90 percent. What would be the approximate expected appreciation rate on home equity EAHE) ?

• A) 4.0%
• B) 4.4%
• C) 10%
• D) 20%
• E) 40%

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Definitions:

Own Capital

The personal resources that an investor or business owner invests into a business venture.

Economic Costs

Total expenses incurred in the production of goods and services, including both explicit and implicit costs.

Own Capital

The funds or assets owned by a business or individual, invested to start or operate a business.

Long Run

A period of time in which all factors of production and costs are variable, allowing firms to adjust all inputs in response to market changes.