Stephanie and Joseph purchased a home for $275,000 in Hi-Gro

Stephanie and Joseph purchased a home for $275,000 in Hi-Gro City. They had to pay $55,000 as down payment and obtained a 30-year mortgage loan from a bank for the remaining amount. Two years later, the value of their home rose by 30 percent. Assuming that after making two years of payments on the 30-year mortgage, the outstanding mortgage balance was still $205,000. How much equity does the buyer have in her home? What rate of return have they earned on their initial $55,000 investment?

  1. Amount of loan principal when home was purchased (at closing): Use by subtraction and by multiplication
  2. Market value of their home two years later:
  3. Stephanie's and Joseph's equity in the home two years later:
  4. Their rate of return:

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