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David and Daniel purchase identical houses for $1000000. David makes a down payment of $200000 while Daniel only puts down $100000; for each individual, the
David and Daniel purchase identical houses for $1000000. David makes a down payment of $200000 while Daniel only puts down $100000; for each individual, the down payment is the total of his net worth. Assuming everything else equal, who is more highly leveraged? If house prices in the neighborhood immediately fall by 10 percent (before any mortgage payments are made), what will happen to Davids and Daniels net worth?
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