Question: Joe and Mike purchase identical houses for 200 000 Joe makes
Joe and Mike purchase identical houses for $200,000. Joe makes a down payment of $40,000 while Mike only puts down $10,000; for each individual, the down payment is the total of his net worth. Assuming everything else equal, who is more highly leveraged? If house prices in the neighborhood immediately fall by 10 percent (before any mortgage payments are made), what would happen to Joe’s and Mike’s net worth?
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