In Year 1 Jorge buys a home for $200,000, making a down payment of $40,000 and taking out a loan from the bank for $160,000 to finance the balance. In Year 5 the remaining loan balance is $130,000 while the home has increased in value to $270,000. Jorge refinances with a loan company that agrees to lend 125% of the value of the home, or $337,500, using $130,000 to repay the bank loan and providing $207,500 in cash. Jorge immediately spends $10,000 of the cash on a lavish vacation to the Bahamas, and $20,000 to pay down credit cards. How much of the $337,500 home equity loan balance is allowable for calculating the home mortgage interest deduction on Jorge’s Year 5 tax return?

a. $270,000
b. $240,000
c. $230,000
d. $220,000

4. suppose that pollution in a neighborhood comes from two factories, with marginal benefit curves given by mb1 = 12 – p1 and mb2 = 8 – p2. the level of pollution in the neighborhood is given by p = p1 + p2. the government wants to limit pollution by instituting a pollution-rights market. the government’s desired level of p is 10, so it prints 10 pollution rights and offers them for sale to the firms. a)find the equilibrium selling price of a pollution right, as well as the allocation of rights (and hence pollution levels) across the two factories. b)repeat part (a) for the case where the government’s desired level of pollution equals 14. c)comment on the usefulness of a pollution rights market in achieving efficient levels of pollution abatement.

Imagine you own an established startup with growing profits. you are looking for funding to greatly expand company operations. what method of financing would be best for you?

Consider 8.5 percent swiss franc/u. s. dollar dual-currency bonds that pay $666.67 at maturity per sf1,000 of par value. it sells at par. what is the implicit sf/$ exchange rate at maturity? will the investor be better or worse off at maturity if the actual sf/$ exchange rate is sf1.35/$1.00