# Suppose Kate buys a house for \$100,000

Suppose Kate buys a issue for \$100,000 using a downpayment (equity) of \$20,000
and a hypothecation of \$80,000 where hypothecations entertain scant burden i.e. an nonrecourse
clause that she can concession the issue extraneously paying her debit in bountiful if the issue is worth
less than her debit. Suppose that it is costless to buy and hawk issues and the interest
rate is cipher.
1. What is the retaliate to equity if the estimate of the issue rises to \$120,000?
A. 20% B. 50% C. 100% D. 200% E. None of A-D
2. Suppose instead that Kate had bought the issue using a downpayment (equity) of
\$40,000 and a hypothecation of \$60,000. Now what is the retaliate to equity if the estimate
of the issue rises to \$120,000?
A. 20% B. 50% C. 100% D. 200% E. None of A-D
3. Suppose that Kate had bought the issue using a downpayment (equity) of \$25,000
and a hypothecation of \$75,000. Now what is the retaliate to equity if the estimate of the
issue falls to \$95,000?
A. -20% B. -50% C. -100% D. -200% E. None of A-D
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