Real Estate Math
A house depreciates 2.5% annually for 3 years. If it was worth $280,000 originally, what is its depreciated value after 3 years?
A$259,000
B$259,350✓ Correct
C$262,220
D$263,640
Explanation
Year 1: $280,000 x 0.975 = $273,000.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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