Hank, Whose Adjusted Gross Income Is $100,000, Purchases a New

question 27

Multiple Choice

Hank, whose adjusted gross income is $100,000, purchases a new principal residence in the current year for $250,000. He borrows $220,000 from a local mortgage company and pays loan origination fees of $1,600 and mortgage insurance premiums of $1,500. During the year, Hank pays $7,000 of interest on the loan. What is Hank's allowable interest deduction for the year?

• A) $ 7,000
• B) $ 7,750
• C) $ 8,500
• D) $ 8,600
• E) $10,100

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Definitions:

Risky Portfolio

A collection of investments with higher expected returns that comes with a greater level of risk and volatility compared to the overall market.

Standard Deviation

A statistical measure that quantifies the variation or spread of a set of numbers from its average, used to gauge volatility.

Risk-Free Asset

An investment that is expected to deliver its return with certainty, with government bonds often considered as the closest example.

Risky Portfolio

An investment portfolio that contains assets with higher volatility and potential for significant variations in returns, offering the possibility of higher gains at the risk of greater losses.