Debt and Credit Card Debts

Good Essays
1153 Words
Grammar
Plagiarism
Writing
Score
Debt and Credit Card Debts
PROBLEMS (p. 180)
1. A few years ago, Simon Powell purchased a home for \$150,000. Today, the home is worth \$250,000. His remaining mortgage balance is \$100,000. Assuming that Simon can borrow up to 75 percent of the market value, what is the maximum amount he can borrow? (LO 5.2)
Present market value of Simon’s home = \$250,000. Simon can borrow up to 75 percent of the market value, or \$187,500. Simon still owes \$100,000 mortgage on his home. Therefore, he can borrow an additional \$87,500.
2. Louise McIntyre’s monthly gross income is \$3,000. Her employer withholds \$700 in federal, state, and local income taxes and \$250 in Social Security taxes per month. Louise contributes \$100 per month for her IRA. Her monthly credit payments for VISA and MasterCard are \$65 and \$60, respectively. Her monthly payment on an automobile loan is \$375. What is Louise’s debt payments-to-income ratio? Is Louise living within her means? (LO 5.3)
Louise’s Gross Income
=
\$3,000

Less: Income taxes
=
-700

Less: Social Security Tax
=
-250

Less: IRA contribution
=
-100

Net take-home pay
=
\$1,950

Her monthly payments on VISA, MasterCard, and a car loan add up to \$500 per month. Louise’s debt payments to income ratio is 500 to 1,950, or 25.6 percent. This ratio exceeds the recommended 20 percent figure. Therefore, Louise is overextended. Her maximum monthly loan and credit card payments should not be over \$390.
3. Robert Sampson owns a \$175,000 townhouse and still has an unpaid mortgage of \$140,000. In addition to his mortgage, he has the following liabilities:
Visa
\$705
MasterCard
280
Discover card
505
Education loan
2,000
Personal bank loan
300
Auto loan
5,000

Total
\$8,790

Robert’s net worth (not including his home) is about \$35,000,. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property. What is Robert’s debt-to-equity ratio? Has he reached the upper limit of debt obligations?

You May Also Find These Documents Helpful

• Satisfactory Essays

Buyers loan is at 6% . Compute buyer daily interest charges from day of closing through the end of the month of April.…

• 277 Words
• 2 Pages
Satisfactory Essays
• Satisfactory Essays

Accounting 440 Bank

• 107692 Words
• 431 Pages

Judy owns a 20% interest in a partnership (not real estate) in which her at-risk amount was \$35,000 at the beginning of the year. The partnership borrowed \$50,000 on a recourse note and made a \$40,000 profit during the year. Her at-risk amount at the end of the year is \$43,000.…

• 107692 Words
• 431 Pages
Satisfactory Essays
• Powerful Essays

A - She has 3 teenage sons and a husband that is disabled. She only has a \$200 budget a month to spend…

• 747 Words
• 3 Pages
Powerful Essays
• Good Essays

The first option that Alexander has is through a savings bank, transferring the mortgage from seller to buyer. The mortgages account for \$400,000, bringing the total investment including Alexander’s contributions to \$480,000. Expenses already incurred include mortgage origination fees and legal expenses, which are not included in the closing costs, which include the price of the property, bank fees, and \$375,000 in escrow. After accounting for these calculations for remodeling, there is a \$60,000 gap required to be paid from the initial \$165,000. In addition to this large sum of money, this particular mortgage is loaned in stages, minimizing the cash flow available to account for closing costs.…

• 268 Words
• 2 Pages
Good Essays
• Satisfactory Essays

Following are the list of each expenses in budget A Addae spends in a month. The bachelor pad apartment cost \$650.00, telephone/internet for \$115.46, \$47.00 for monthly pass, \$80.00 for toilet paper, feminine hygiene products and toothpaste, \$100.00 for clothes and shoes, \$15.00 for other cleaning cost, \$20.00 gifts for social event, \$7.99 for netflix, \$50.00 for other miscellaneous fees, \$200.00 for groceries, \$30.00 for beverages or meals at a café or restaurant and \$15.00 for snacks or prepared foods purchased at a convenience store or on the road. The total expenses Addae have in budget A is \$1,349.46. Due to Addae disability he/she can’t find a decent job. With the help of Ontario Works a budget is given to him/her for \$656.00 a month.…

• 242 Words
• 1 Page
Satisfactory Essays
• Satisfactory Essays

1.Briefly list any financial problems you face personally or as a household, such as too much debt not enough savings, or not enough income.…

• 288 Words
• 2 Pages
Satisfactory Essays
• Satisfactory Essays

Joe and his wife had just purchased their first home. With their mortgage payments totaling \$1,200 per month, the loss of Joe's salary would mean the loss of their home.…

• 395 Words
• 1 Page
Satisfactory Essays
• Good Essays

• 8230 Words
• 33 Pages

1,000,000 1,000,000 750,000 Assume a home is purchased today for \$1,000,000. The purchase is financed with \$250,000 of equity and \$750,000 of debt. Over the next five years, enough rent is generated to repay \$500,000 of debt, in addition to paying interest expense. Assuming the value of the home remains at \$1,000,000 five years later, the equity stake in the home has grown to \$750,000 5 1,000,000 250,000 750,000 Assuming this home is sold at the end of the fifth year for \$1,000,000, \$250,000 of the proceeds must be used to repay the remaining debt, which leaves the owner with \$750,000. The return on the equity…

• 8230 Words
• 33 Pages
Good Essays
• Satisfactory Essays

PFP L04

• 637 Words
• 6 Pages

Negotiate with creditors Call creditors and let them know she is willing to pay the debt  negotiate for a lower interest rate for debt payment 6 Q1) Given her current situation, list some suggestions on how Shelby can reduce her credit card debt. (Cont’) 2. Pay off all the credit card debts do not only pay the minimum payment  higher interest rate will be charged only hold one credit card  they each have several credit 7 cards Q1) Given her current…

• 637 Words
• 6 Pages
Satisfactory Essays
• Satisfactory Essays

Payroll Accounting, 2012 Edition Check Figures Chapter 2 Problems 2–1a. (c) \$228.29 2–3a. gross earnings, \$1,618.60 2–5a. overtime pay, \$11.52 2–7a. (b) total earnings, \$747.40 2–9a.…

• 378 Words
• 2 Pages
Satisfactory Essays
• Satisfactory Essays

case study

• 266 Words
• 2 Pages

Vikki Rocco, (age 26) has been living in her apartment for three years. Her savings system is well organized and she feels comfortable about the progress she is making with her financial goals. Her credit card balance is now paid in full monthly. She is continuing to save more than 10% of her gross salary in her 401(k) plan and she stay within budget. After dating for two years, she is engaged to Tim Treble (age 28), and they are planning to be married in nine months.…

• 266 Words
• 2 Pages
Satisfactory Essays
• Powerful Essays

Week 1 Memo

• 438 Words
• 2 Pages

Clients- Ken and Tina Close are married with two children, Tyler (16) and Nikki (14). Ken is 42 year’s old disabled ex-factory worker with a high school education. Tina is a 37 year old Event Planner with an Associate’s Degree in customer service. Although Ken is disabled he does receive disability benefits of \$14,500 annually and Tina’s annual income is \$32,500. Tyler is a junior at BHS and works part-time at Culver’s with an annual income of \$3,100. Nikki is a freshman at BHS and is not employed. The family’s goals are to reduce credit card debt and to save for a vacation. The family’s biggest concerns are that their credit will suffer if they do not pay off the debt and that Tyler and Nikki will both need vehicles soon.…

• 438 Words
• 2 Pages
Powerful Essays
• Satisfactory Essays

To keep the debt-equity ratio the same, the new borrowing should be \$45,000,000 - \$6,000,000 = \$39,000,000…

• 317 Words
• 2 Pages
Satisfactory Essays
• Good Essays

> Income must be evaluated relative to the demands placed upon it, information should be sought about the demands upon the income brought about by family needs and existing obligations. Investigation of individual’s income is essential.…

• 1024 Words
• 5 Pages
Good Essays
• Powerful Essays

Question Explanation This is a simple NPV problem, where the loan is positive NPV only because Sachin cannot borrow at market rates,…

• 1981 Words
• 8 Pages
Powerful Essays