Julio has a house worth $220,000. He has a $175,000 mortgage. Julio says that in this situation, his asset equity is really only $45,000. Which statement explains whether Julio is correct?

The house is worth $220,000, and Julio owes $175,000 on it. Subtracting the mortgage from the house’s value gives $220,000 − $175,000 = $45,000 in home equity. So choice A is correct: Julio’s equity in the house is $45,000, even though the house itself is a $220,000 asset.

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