Suppose we have the following real estate speculation scenar…
Suppose we have the following real estate speculation scenario for a 1 year investment: Purchase price of house: $200,000 Equity: $190,000 Debt: $10,000 @10% interest Interest Payments: $1,000 What is the leverage ratio in this scenario? Suppose that real estate prices are increasing. All else being equal, what would happen if the leverage ratio increased?
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