In the first worksheet in the Excel spreadsheet, reproduce Table 8.1 on p. 118 by filling in columns D and columns F to I. After completing the table, plot two curves in your spreadsheet relating ROE to the year-end house priceone for a down payment of $30,000 and the other for a down payment of $60,000, and both in the same chart. (Hint: Use the scatter plot option with connected lines.) Which curve is steeper?

B C E F Final equity1 ROE1 (%) Final equity2 ROE2 (%) EOY house price Cost of house Borrowing rate Down payment 1 Amt. owed 345,000 2 300,000 0.04 30,000 3 60,000 340,000 4 335,000 330,000 325,000 7 320,000 8 315,000 9 312,000 10 310,000 11 305,000 12 300,000 13 295,000 290,000 14 285,000 15 16 280,800 17 280,000 18 275,000 19 270,000 20 265,000 21 260,000 22 255,000 23 250,000 24 249,600 Admati example Blinder example1 + Borrowing at 4 Percent to Buy a $300,000 House in Two Down Payment Scenarios (assuminga nonrecourse clause) TABLE 8.1 Borrowing with a $30,000 down payment (initial equity) Year-end house price (dollars) Percent change in house price Final equity Mortgage debt (dollars) Return on equity (percent) (dollars) 345,000 15 280,800 64,200 114 315,000 280,800 34,200 14 300,000 0 280,800 19,200 -36 285,000 -5 280,800 4,200 -86 255,000 -15 280,800 0 -100 Borrowing witha $60,000 down payment (initial equity) Year-end house price (dollars) Percent change in house price Mortgage debt (dollars) Final equity Return on equity (percent) (dollars) 345,000 15 249,600 95,400 59 315,000 5 249,600 65,400 9 300,000 249,600 50,400 -16 285,000 -5 249,600 35,400 -41 255,000 -15 249,600 5,400 -91 B C E F Final equity1 ROE1 (%) Final equity2 ROE2 (%) EOY house price Cost of house Borrowing rate Down payment 1 Amt. owed 345,000 2 300,000 0.04 30,000 3 60,000 340,000 4 335,000 330,000 325,000 7 320,000 8 315,000 9 312,000 10 310,000 11 305,000 12 300,000 13 295,000 290,000 14 285,000 15 16 280,800 17 280,000 18 275,000 19 270,000 20 265,000 21 260,000 22 255,000 23 250,000 24 249,600 Admati example Blinder example1 + Borrowing at 4 Percent to Buy a $300,000 House in Two Down Payment Scenarios (assuminga nonrecourse clause) TABLE 8.1 Borrowing with a $30,000 down payment (initial equity) Year-end house price (dollars) Percent change in house price Final equity Mortgage debt (dollars) Return on equity (percent) (dollars) 345,000 15 280,800 64,200 114 315,000 280,800 34,200 14 300,000 0 280,800 19,200 -36 285,000 -5 280,800 4,200 -86 255,000 -15 280,800 0 -100 Borrowing witha $60,000 down payment (initial equity) Year-end house price (dollars) Percent change in house price Mortgage debt (dollars) Final equity Return on equity (percent) (dollars) 345,000 15 249,600 95,400 59 315,000 5 249,600 65,400 9 300,000 249,600 50,400 -16 285,000 -5 249,600 35,400 -41 255,000 -15 249,600 5,400 -91