Question

HELP WITH FINANCIAL LIT--WILL MARK BRANLIEST--

Answer 1

The option D is correct for part 1. Buy a new car at market value for $15,000, Car depreciates 20% upon transfer of ownership is an event which affects most to the net worth.  

The option B is correct for part 2. Subprime lending rates are higher than the prime lending rates and are commonly offered to lower credit score people.  

The option A is correct for part 3. The amount of mortgage is $ 200,000 when the cost of the house is $250,000 and pays a down payment of 20 percent.  

The option B is correct for part 4. Variable-rate loan typically has a lower interest rate than fixed-rate loans because, with variable rate loans, the borrower assumes the risk that the interest rate might increase.  

The option A is correct for part 5. Jocelyn is comparing two fixed-rate loan options, a 15 year and a 30-year mortgage. Both options have the same interest rate and amount borrowed. The 30 years, when compared to the 15-year loan will have a lower monthly payment and a higher total cost when repayment is completed.

The option D is correct for part 6. Megan’s net worth is negative $3500.  

Further Explanation:

Part 1:

The net worth of buying a car of $15,000 and after that 20% depreciation is taken. This provides the negative net worth has most. Net worth is basically the difference of assets and liabilities.  

Part 2:

Subprime lending is commonly offered to those which have a lower credit score. Lower credit score means the individual is not a trusty party. Prime lending is commonly offered to the higher credit score individual. A higher credit score means the individual does not make any default. Therefore, the subprime lending rate is higher than the prime lending rates as the possibility of making default is more in this case.  

Part 3:

Computation of amount of mortgage:

Down payment = Cost of the house × Percentage of down payment

   = $250,000 × 20%

   = $50,000

Amount of mortgage = Cost of the house – Down payment

            = $250,000 - $50,000

           = $200,000

Therefore the amount of mortgage is $200,000.  

Part 4:

Variable-rate loan has lower interest rate than the fixed-rate loans, as the borrower is expected the lower interest rate. Variable-rate loan varies from time to time, but the fixed rate is once decided fix for the whole period.  

Part 5:

As the time period is, the monthly payment is decreased. Now, the same amount of money has to pay for more period. So, the monthly is less in the period 30 years and the monthly payment is more in the period 15 years.  As the repayment period is increased, the interest amount on the principal amount is also increased. This will ultimately increase the total cost of the loan.  

Part 6:

Computation of net worth:

Net worth is calculated by subtracting the liabilities from the assets. The total assets are computed by adding the short term savings of $500 and the retirement savings amount of $5,000. The total liabilities are computed by adding the credit card debt of $1,500 and Student loan debt$7500.  

Total Assets = Short term savings + Retirement savings

          = $500 + $5,000

          = $5,500

Total Liabilities = Credit card debt + Student loan debt

   = $1,500 + $7,500

   = $9,000

Net worth = Total Assets - Total Liabilities

     = $5,500 - $9,000

     = -$3,500

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Answer details:

Grade: Middle School

Subject: Accounts

Chapter: Net worth

Keywords:

Subprime lending, prime lending rates, net worth, total assets, total liabilities,  Meghna, greatest impact, monthly payment, repayment period,  mortgage, down payment, cost of the house.  

Answer 2

1. Go on a vacation that costs $3,500 
Paying off money for buying a car will not decrease your net worth as you get the car as assets for the money you use. But the depreciates 20% will cause you to lose $3,000 assets. Assuming you are not buying assets at all, go on a vacation that costs $3,500 will increase liability without any effect on assets. Paying up bills will decrease your asset but it also decreases your liability so the net worth wouldn't change. 

2. 1) higher 2) lower
Subprime lending is lending money to people with a low credit score that was not really fit for the credit. This means the risk of getting the money back would be higher than prime lending. Since the risk of losing the money is higher, the interest should be higher than prime lending.

3. $200,000
The house price is $250k and the buyer put 20% down which is; 20%*$250k= $50k
Then the rest of the money that needs to be paid by the mortgage would be: $250k-$50k=$200k

4. Lower, Increase
In variable rate loans, the interest will be adjusted by the market. That means the rates will be unpredictable since it was based on the condition of the market. It will be safer for the creditor since he/she will absolutely get the revenue no matter how the market goes. This change is a bit dangerous for the borrower because the number of rates can increase dramatically. 

5. Higher, lower
When you pay 30 years mortgage, the total loan is divided by 30 years which was 2 times more than 15 years. Excluding the rates, you can estimate that the 15 years mortgage payment will be twice than 30years mortgage. The total cost would also be lower since the interest rate is applied for 15 years, about half than 30 years.

6. Negative $3,500
Net worth is assets minus liability.
The list of the assets would be: 
$500 in short-term savings
$5,000 in her retirement savings account
Total assets= $500+$5,000= $5,500

The list of liability would be:
$1,500 in credit card debt
student loan debt of $7,500

Total liability= $1,500+ $7,500= $9,000Net worth= $5,500- $9,000= - $3,500