which of the following modifications to the list of assets and liabilities below would result in a negative…
which of the following modifications to the list of assets and liabilities below would result in a negative net worth? house valued at $30,000. mortgage owed $78,000. car valued at $11,000. car loan of $5,000. student loan of $13,700. stocks valued at $2,500. savings of $3,000. a. net worth is already negative. b. house value decreasing to $83,000. c. borrowing $10,000 more in student loans. d. selling off all owned stocks. please select the best answer from the choices provided
Answer
Explanation:
Step1: Calculate initial net - worth
Net worth = Total assets - Total liabilities. Total assets = House value+Car value + Stocks value+Savings = $30000 + 11000+2500 + 3000=46500$. Total liabilities = Mortgage + Car loan+Student loan = $78000+5000 + 13700=96700$. Initial net worth = $46500-96700=-50200$.
Step2: Analyze option a
If house value decreases to $83000$ (this seems to be a wrong value as it is higher than the original $30000$, assuming it's a typo and you mean decrease to a lower value, but based on the initial negative net - worth, this change won't make it more negative).
Step3: Analyze option b
If borrowing $10000$ more in student loans, new liabilities = $96700 + 10000=106700$, assets remain the same. New net worth = $46500-106700=-60200$, which is more negative.
Step4: Analyze option c
Selling off all owned stocks means assets decrease by $2500$. New assets = $46500 - 2500=44000$. New net worth = $44000-96700=-52700$.
Answer:
C. Borrowing $10,000$ more in student loans.