Question

What do you think is causing the Economic Net Benefit(Mortgage) to be positive? The percentage point...

What do you think is causing the Economic Net Benefit(Mortgage) to be positive?

The percentage point difference (spread) between the expected return in the stock market and the mortgage interest rate.

None of the available answers

The difference between the Accounting Net Benefit(Mortgage) and the MB(Mortgage).

The difference between the Accounting Net Benefit(No Mortgage) and the MB(Mortgage).

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Answer #1

Answer) A) the percentage point difference between the expected return in stock market and the mortgage interest rate.

Explanation: spread= expected return in stock - mortgage interest rate. When the spread is positive economic net benefit is positive.

Other options are false because if the economic net benefit is negative risk is involved in taking out mortgage. The mortgage interest rate is less and spread become negative. Also accounting net benefit is equal to difference between MB ( mortgage)and MC( cost) .

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