PFIN 2nd Edition by Lawrence Gitman ,Michael Joehnk,Randall Billingsley

Exercise 4

Joe and Diane Peters have a home with an appraised value of $180,000 and a mortgage balance of only $90,000. Given that an S L is willing to lend money at a loan-to-value ratio of 75%, how big a home equity credit line can Joe and Diane obtain? How much, if any, of this line would qualify as tax-deductible interest if their house originally cost $200,000?