Question

i) He owes $80,000 for his house which he believes is worth $150,000 ii) His car is worth $20,000 against which there there is $2,000 on the remaining bank loan. iii) his stock protfolio has risen to $50,000 iv) he has a $10,000 bank balance in his bank account which is earning him 1.2% annual interest rate v) and the value of this belonging is $45,000. he has just received his monthly paycheck for $6,000 and he is trying to decide about taking a vacation and whether or not to pay off his car loan his monthly expenses are $3,000 which includes the interest expense on his auto loan vi)his two possible vacation choices are the bahamas for $2,000 or a local beach for $1,000 If he doesn't have enough money to cover all of his expenses for the month he will sell enough of his stock to cover the excess expenses. a. use a spreadsheet to inpurt each of georges assets (i) to (v) in the first column, the value of these assets in the second column; and the liabilities (if any) against those assets in the third column. In the fourth column compute the net asset value of each of the assets. Total the fourth column to determine GEorge's NEt worth. b. Compute the additional net income that George will have from his paycheck plus the interest rate interest on his bank account minus the monthly expenses Use this info to answer parts c through f below. c. Reapeat part (a) for the end of the month assuming George does not take a vacation anys off his auto loans. d. Repeat part (a) for the end of the month assuming George takes the Bahamas vacation and only pays & 1,000 on the principal of the auto loan.

Answer 1

Answer - Part A

Assets Liability. Net Asset Value

Home 150,000 80,000 70,000

Car.    20,000 2,000 18,000

Stock Portfolio 50,000 50,000

Bank account 10,000 10,000

Belonging 45,000 45,000

Total Networth 275,000 82,000 193,000

Answer - Part B

Monthly

Bank Interest 10

Paycheck 6,000

Expenses 3,000

Additional Net Income 3,010

Answer - Part C

No vacation, pays off loan

Home 70,000

Car 20,000

Stock Portfolio 50,000

Bank account 10,000

Belonging 45,000

Additional Net Income 1,010

Total Networth 196,010

Answer - Part D

Bahamas vacation, pays $1000 loan

Home 70,000

Car 19,000

Stock Portfolio 50,000

Bank account 10,000

Belonging 45,000

Additional Net Income 3,010

Bahamas vacation (2,000)

Principal Payoff (1,000)

Total Networth 194,010