Mike and Tricia recently discovered their net worth dropped by 20 percent. Their largest asset is their home, which they purchased 10 years ago with a fixed-rate mortgage and a 20 percent down payment. Although they've made regular mortgage payments, the house might have contributed to their reduced net worth because

1.) the market value of the house increased with their mortgage payments.

2.) the 20 percent down payment caused the value of the home to drop 20 percent.

3.) the current value of the house is less than what they paid for it.

4.) they invested all of their money in a new kitchen.