Suppose you buy a home for 25% down. You have to borrow the rest. Your rich friend, Z, buys the same priced home next door to you with all cash, and borrows no money. Suppose housing prices double overnight! You and Z are excited and sell the house! Note: the price of the house is irrelevant, but you can assume 100. Do not include any other cash flows, such as mortgage interest, transaction costs, taxes, costs of carry, brokerage fees, closing costs, commissions, etc.


Required:

a. What is your return of investment?

b. What is Z's return of investment?