a. Assume that the market value of your condo has now risen to $240,000. Ignoring interest and other costs, and assuming the loan amount is still $160,000, calculate your rate of return on your asset (ROA) and your rate of return on your equity (ROE). b. Now assume that, instead of (a), you only put down $20,000 and borrowed $180,000 to buy the condo. Assuming that the market value of your house has risen to $240,000 and ignoring interest and other costs, calculate your rate of return on your asset (ROA) and your rate of return on your equity (ROE). c. Now, instead of (a) or (b), suppose the value of the condo fell from $200,000 to $150,000. Assuming you paid $200,000, financing it with $40,00
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2. Suppose you bought a condo for $200,000 financing it with a $40,000 down payment of your own funds and a $160,000 mortgage loan from a bank. (10 points)
a.
Assume that the market value of your condo has now risen to $240,000. Ignoring
interest and other costs, and assuming the loan amount is still $160,000, calculate your
return on your asset (ROA) and your rate of return on your equity (ROE).
b.
Now assume that, instead of (a), you only put down $20,000 and borrowed $180,000 to
buy the condo. Assuming that the market value of your house has risen to $240,000 and
ignoring interest and other costs, calculate your rate of return on your asset (ROA) and your rate of return on your equity (ROE).
c.
Now, instead of (a) or (b), suppose the value of the condo fell from $200,000 to $150,000. Assuming you paid $200,000, financing it with $40,000 of your own money and $160,000 with a mortgage loan, and ignoring interest and other costs, calculate your rate of return on your asset (ROA) and your rate of return on your equity (ROE). What is the value of your equity stake in the condo after the price fall?
D.
Now assume that, instead of (c), you only put down $20,000 and borrowed $230,000 to buy the $250,000 house. Assuming that the market value of your house has fallen to $210,000 and
ignoring interest and other costs, calculate your rate of return on your asset (ROA) and your
rate of return on equity (ROE).
* SOLUTION :-
(2)
As per guidelines I answered first three sub parts like a,b,c.
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