Future Business Leaders of America (FBLA) Business Calculations Practice Test

A property has an appraised value of $250,000. Mary wants to buy it for $245,000 with a down payment of $50,000. What is the loan to value ratio?

1. 20%

2. 19%

3. 98%

4. 78%

The correct answer is: 78%

To determine the loan-to-value (LTV) ratio, you first need to understand that this ratio is expressed as a percentage and is calculated by dividing the amount of the loan by the appraised value of the property. In this scenario, Mary is purchasing a property with an appraised value of $250,000. She plans to make a down payment of $50,000, which means the loan amount will be the purchase price minus the down payment. To find the loan amount: - The purchase price of the property is $245,000. - Since she is putting down $50,000, the loan amount needed is $245,000 - $50,000 = $195,000. Next, to find the loan-to-value ratio: - The LTV ratio formula is: (Loan Amount / Appraised Value) × 100. - In this case, it would be: ($195,000 / $250,000) × 100. Calculating this gives: - $195,000 ÷ $250,000 = 0.78. - Multiplying by 100 results in an LTV of 78%. This indicates that 78% of the property's value is being financed through a