Question

Julio has a house worth $220,000. He has a $175,000 mortgage. Julio says that in this situation, his asset is really only $45,000. Which statement explains whether Julio is correct?

A. Julio is correct because the $45,000 equity in the house is the real asset.
B. Julio is correct because he can pay $45,000 and have no more liabilities.
C. Julio is not correct because the same item cannot represent both an asset and a liability.
D. Julio is not correct because the house cannot be worth more than the mortgage.

Answer 1

correct answer: A.) Julio is correct because the $45000 equity in the house is the real asset.

Answer 2

Answer: The correct answer is "A".

Explanation: Julio is correct because the $45,000 equity in the house is the real asset.

This happens because the real value of the asset is the value of the house minus the value of the mortgage therefore it is:

220000 - 175000 = $45000.