Assume That Houses in an Area Appreciate at the Rate

question 10

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 is the approximate expected appreciation rate on home equity (EAHE) ?

• A)4.0%
• B)10%
• C)20%
• D)40%

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Definitions:

Significant Influence

The power to participate in the financial and operating policy decisions of an investee but not control those policies.

Cost Method

An accounting method used to value an investment, based on the cost to acquire the asset, without recognizing post-purchase market changes.

Dividends

Payments made by a corporation to its shareholder members, usually derived from profits.

Management Fees

Charges levied by management for the operation of an investment fund, company, or another entity, usually calculated as a percentage of assets under management.