Final answer:
The question involves exponential growth or decay of house values and the concept of equity in real estate. Equity is calculated by subtracting the amount owed on a mortgage from the current market value of the property. The subject has real-world relevance, particularly in the context of housing bubbles like the one preceding the 2007 financial crisis.
Step-by-step explanation:
The question pertains to the exponential growth or decay in the value of two houses over a period. To address this question, we would typically use the formula for exponential growth or decay, which is V = P * e^(rt), where V is the final value, P is the initial value, r is the rate of growth or decay, t is the time in years, and e is the base of the natural logarithm. However, additional information about the timeframe and rate is needed to calculate the precise exponential rates at which the houses' values are changing.
In the context of real estate, equity is an important concept referring to the difference between the market value of a home and the amount still owed on a mortgage. For example, if Freda's house is valued at $250,000 and she owes zero on it, her equity is the full market value, which is $250,000. Similarly, if Frank's house is valued at $160,000 and he owes $60,000 on his mortgage, his equity in the house is $100,000.
The given scenarios can be linked to the housing bubble and the 2007 financial crisis, illustrating how changes in property values can significantly affect homeowners' financial assets. At the peak of the housing bubble, US housing equity reached $13 trillion, representing a substantial portion of Americans' financial wealth. Equity reduction or growth can have massive implications for individual wealth and the broader economy.