Final answer:
The Simpsons could potentially receive a home equity line of credit up to $55,000 based on their home's market value of $225,000, existing equity of $60,000, and outstanding mortgage of $125,000 within the 80% loan-to-value ratio limit.
Step-by-step explanation:
The correct answer to what the Simpsons can receive on a home equity line of credit is $45,000. To calculate this, you need to determine the maximum allowable loan-to-value (LTV) amount that can be borrowed. An LTV of 80% of the home's market value is considered.
The Simpsons' home has a market value of $225,000. Calculating 80% of this gives us $225,000 * 80% = $180,000. This figure represents the maximum potential loan amount they could theoretically have against the home, given the LTV restriction. However, they already have an outstanding mortgage of $125,000. This needs to be deducted from the theoretical maximum to find out how much more they can borrow: $180,000 - $125,000 = $55,000.
But the equity they have in their home is $60,000, which is greater than the additional $55,000 they can borrow. Therefore, the maximum additional amount they could receive above their existing mortgage without exceeding their equity or the LTV limit is $55,000. This means Option D ($45,000) is incorrect, and the correct option based on the provided numbers should actually be Option B ($55,000).