Final answer:
Equity is the difference between an asset's market value and the amount owed to the bank. It represents the owner's financial interest in the asset.
Step-by-step explanation:
Equity is the difference between an asset's market value and the amount still owed to the bank. It represents the owner's financial interest in the asset. For example, if the value of a house is $200,000 and the owner owes $180,000 to the bank, the equity would be $20,000.
Equity can vary depending on the specific situation. If a person owns a house with no outstanding debt, their equity would be equal to the market value of the house. In the case of Freda who owes zero to the bank, her equity would be the entire $250,000 value of her house.
It's important to understand that equity is not a fixed value and can change over time. Factors such as changes in market value and outstanding debt can affect equity.