37. A home was bought 4 years ago. The purchase price was $92,000 and the buyer made a down payment of $11,000. The current loan balance is $79,000. The house was recently appraised for $116,000. What is the equity
Answer: D
The equity in the home is $37,000.
Equity is calculated by subtracting the current loan balance from the appraised value of the home. In this case, the appraised value is $116,000, and the current loan balance is $79,000, resulting in an equity of $37,000.
A) $13,000
This option is incorrect because it underestimates the equity. It does not accurately reflect the difference between the appraised value and the loan balance. The calculation of equity clearly shows a higher value.
B) $24,000
This option is also incorrect as it miscalculates the equity. The equity should be derived from subtracting the loan balance from the appraised value, which is significantly higher than $24,000.
C) $35,000
While this option is closer to the correct answer, it still does not accurately represent the equity. The equity calculation yields $37,000, making this option incorrect.
D) $37,000
This option is correct because it accurately reflects the equity calculated by subtracting the current loan balance of $79,000 from the appraised value of $116,000. Thus, the equity is indeed $37,000.
Conclusion
The correct calculation of equity demonstrates that the homeowner has $37,000 in equity, derived from the difference between the appraised value and the loan balance. All other options either underestimate or miscalculate this figure, making them incorrect. The fundamental concept of equity is clearly illustrated in the correct answer.