Question

Bodhi recently bought a $225,000 condo. He took out a $200,000 mortgage loan.

Which of the following scenarios would INCREASE Bodhi's equity? Select all that
apply.
(A) The market value of Bodhi's condo increased to $245,000
(B) The market of value of Bodhi's condo decreased to $200,000
(C) Bodhi pays his mortgage regularly for 6 months and now owes $198,790 neg
(D) Bodhi misses his first mortgage payment and now owes $200,052

Answer 1

To calculate Bodhi's equity, subtract the amount he owes on his mortgage from the market value of his condo. Scenarios (A) and (C) would increase Bodhi's equity.

Step-by-step explanation:

To calculate Bodhi's equity, we need to subtract the amount he owes on his mortgage from the market value of his condo. In this case, Bodhi's condo is valued at $225,000 and he owes $200,000 on his mortgage loan. Therefore, his equity is $225,000 - $200,000 = $25,000.

The scenarios that would increase Bodhi's equity are:

• (A) The market value of Bodhi's condo increased to $245,000. In this case, his equity would be $245,000 - $200,000 = $45,000.
• (C) Bodhi pays his mortgage regularly for 6 months and now owes $198,790. By reducing the amount he owes, his equity would increase to $225,000 - $198,790 = $26,210.

Answer 2

Scenarios (A) and (C) would increase Bodhi's equity in his condo by increasing the property's market value or reducing the mortgage balance, respectively.

Step-by-step explanation:

To determine which scenarios would increase Bodhi's equity in his condo, we need to assess how each scenario affects the market value of the property and the amount he owes on the mortgage. Equity is calculated as the market value of the property minus the mortgage balance owed.

• (A) The market value of Bodhi's condo increased to $245,000: This increase in market value would raise Bodhi's equity because the value of the asset has gone up, while the debt remains the same.
• (B) The market of value of Bodhi's condo decreased to $200,000: A decrease in the market value would decrease Bodhi's equity because it reduces the asset's value without changing the debt.
• (C) Bodhi pays his mortgage regularly for 6 months and now owes $198,790: Making regular mortgage payments reduces the amount owed on the mortgage, thus increasing equity.
• (D) Bodhi misses his first mortgage payment and now owes $200,052: Missing payments would not increase equity. In fact, it would likely reduce equity due to additional fees, interest, or penalties that increase the debt.

Based on this understanding, scenarios (A) and (C) would increase Bodhi's equity in his condo because they result in either an increased property value or a reduced mortgage balance.