If purchase price 100,000 and loan 80,000, what is the loan-to-value ratio?

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Study for the General Financial Literacy State Test. Prepare with flashcards and multiple-choice questions, each with hints and explanations. Enhance your financial expertise for success!

Multiple Choice

If purchase price 100,000 and loan 80,000, what is the loan-to-value ratio?

Explanation:
Loan-to-value ratio shows how large the loan is compared to the property's value. Here, you divide the loan amount by the property value: 80,000 divided by 100,000 equals 0.80, which is 80%. This means 80% of the property's value is being financed with the loan. A higher LTV indicates more risk to lenders, while a lower LTV indicates less risk.

Loan-to-value ratio shows how large the loan is compared to the property's value. Here, you divide the loan amount by the property value: 80,000 divided by 100,000 equals 0.80, which is 80%. This means 80% of the property's value is being financed with the loan. A higher LTV indicates more risk to lenders, while a lower LTV indicates less risk.

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