Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 3DTM
(a)
Summary Introduction
Case summary: Person CM who got graduated with a degree in food science and is employed with consumer food company and earning 70,000 annually with $58,000 take-home pay. Person CM pays monthly rent of $1,100. The person CM has loan of $38,000 for which she pays $385 monthly. She has current debt of $8000 on which monthly pay is $240 and has assets of $14,000.
Character in the case: Person CM
Adequate information:The person CM has loan of $38,000 for which she pays $385 monthly. She has current debt of $8000 on which monthly pay is $240 and has assets of $14,000. Monthly rent is $1,100. Annual income 70,000 and net income is $58,000. To determine: Debt payment to disposable income ratio.
(b)
Summary Introduction
Case summary: Person CM who got graduated with a degree in food science and is employed with consumer food company and earning 70,000 annually with $58,000 take-home pay. Person CM pays monthly rent of $1,100. The person CM has loan of $38,000 for which she pays $385 monthly. She has current debt of $8000 on which monthly pay is $240 and has assets of $14,000.
Character in the case: Person CM
Adequate information:The person CM has loan of $38,000 for which she pays $385 monthly. She has current debt of $8000 on which monthly pay is $240 and has assets of $14,000. Monthly rent is $1,100. Annual income 70,000 and net income is $58,000. To determine: Debt to total income ratio.
(c)
Summary Introduction
Case summary: Person CM who got graduated with a degree in food science and is employed with consumer food company and earning 70,000 annually with $58,000 take-home pay. Person CM pays monthly rent of $1,100. The person CM has loan of $38,000 for which she pays $385 monthly. She has current debt of $8000 on which monthly pay is $240 and has assets of $14,000.
Character in the case: Person CM
Adequate information:The person CM has loan of $38,000 for which she pays $385 monthly. She has current debt of $8000 on which monthly pay is $240 and has assets of $14,000. Monthly rent is $1,100. Annual income 70,000 and net income is $58,000. To discuss: the Person CM’s debt situation along with her debt usage during college times.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Chelsea Menken, of Providence, Rhode Island, recently graduated with a degree in food science and now works for a major consumer foods company earning $70,000 per year with about $57,600 in take-home pay. She rents an apartment for $1,200 per month. While in school, she accumulated about $37,000 in student loan debt on which she pays $385 per month. During her last fall semester in school, she had an internship in a city about 100 miles from her campus. She used her credit card for her extra expenses and has a current debt on the account of $8,000. She has been making the minimum payments on the account of about $240 a month. She has assets of $14,000.
1. Calculate Chelsea’s debt payments-to-disposable income ratio. Round your answer to two decimal places.
Jennifer Buffett is a 33-year-old recent MBA graduate. She has been working since she was 18 and has seen her annual salary grow from $20,000 to $90,000 gross, over the span of 15 years. She rents an apartment and does not own any real estate. Her monthly living expenses are $4,000, including her $200 per month car payment and $700 per month student loan payment. She has no other debt and has savings totaling $50,000. She plans to get married next year and start a family of two children. She works as a marketing manager in a medium-size cosmetics company in Texas.
What is Jennifer’s expected risk tolerance? Please, clearly characterize her risk tolerance and justify your response.
What is Jennifer’s expected return requirements? Please justify.
What possible constraints might Jennifer have for her investment decision? Please justify your response.
Kevin Jones, of Elon, North Carolina, is single and recently graduated from law school. He is employed and earns $9,100 per month, an awesome salary for someone only 26 years old. He also has $1,700 withheld for federal income tax, $520 for state income taxes, $680 for Medicare and Social Security taxes, and $240 for health insurance every month. Kevin has outstanding student loans of almost $80,000 on which he pays about $950 per month and a 0% loan on an auto loan payment of $300 on a Ford Fusion Hybrid he purchased new during law school. He is considering taking out a loan to buy a Kawasaki motorcycle.
1. What is Kevin's debt payments-to-disposable income ratio? Round your answer to two decimal places.
Chapter 6 Solutions
Personal Finance (MindTap Course List)
Ch. 6.1 - Prob. 1CCCh. 6.1 - Prob. 2CCCh. 6.1 - Prob. 3CCCh. 6.1 - Prob. 4CCCh. 6.2 - Distinguish among the continuous debt method,...Ch. 6.2 - Prob. 2CCCh. 6.2 - Prob. 3CCCh. 6.2 - Prob. 4CCCh. 6.3 - Prob. 1CCCh. 6.3 - Prob. 2CC
Ch. 6.3 - Prob. 3CCCh. 6.3 - Prob. 4CCCh. 6.3 - Prob. 5CCCh. 6.4 - Prob. 1CCCh. 6.4 - Prob. 2CCCh. 6.4 - Prob. 3CCCh. 6.4 - Distinguish between Chapter 7 and Chapter 13...Ch. 6 - Prob. 1DTMCh. 6 - Buying a Vacation Home. Barrie and Inga Adlington,...Ch. 6 - Prob. 3DTMCh. 6 - The Johnsons Attempt to Resolve Their Credit and...Ch. 6 - Victor and Maria Advise Their Niece Victor and...Ch. 6 - Julia Price Thinks About a Loan to Buy an Inboard...Ch. 6 - Prob. 4FPCCh. 6 - Cousins Discuss Their Debt Situations Melinda...Ch. 6 - Prob. 6FPC
Knowledge Booster
Similar questions
- Lily graduated from UCSD in 2015. Right now she has an excellent job with a take-home income (after taxes) of $5,000 a month. The following is her financial situation: 1. She is single and shares an apartment with a roommate. Her monthly expenses in December 2020 were: Rent: Utilities (including cell phone): Food (including eating out) Car payment Gas Student loan payment Credit card payment Personal loan payment Clothing and personal items TOTAL Net loss of $450.00 As of December 31, 2020, what was Lily's net income for the month of December 2020? Express it in terms of a net gain or a net loss for the month. Net gain of $450.00 $1,400 600 600 No gain or loss No answer text provided. 500 200 1,100 500 300 250 $5,450arrow_forwardYour friend Alice is a full-time college student, earned $4,000 working at the campus bookstore over two semesters last calendar year, and also got a part-time job as a cashier in February, earning $9,500. Alice knows that you have been learning about taxes in your personal finance lessons and asks you, “Do I need to file taxes this year? If I do, what is the process like?” Determine if Alice needs to file taxes this year and explain your reasoning. If you conclude that Alice does need to pay taxes, explain what forms she will need, what the deadlines are, and what method you recommend she use to file her taxes.arrow_forwardMadeline Rollins is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Madeline is living at home and works in a shoe store, earning a gross income of $1,140 per month. Her employer deducts a total of $260 for taxes from her monthly pay. Madeline also pays $160 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $260 per month. Calculate her debt payments-to-income ratio with and without the college loan. (Remember the 20 percent rule.) (Enter your answers as a percent rounded to 2 decimal places.) Debt Payments-to-Income Ratio With college loan % Without college loan %. Pls show steps complete.arrow_forward
- Madeline Rollins is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Madeline is living at home and works in a shoe store, earning a gross income of $960 per month. Her employer deducts a total of $170 for taxes from her monthly pay. Madeline also pays $115 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $170 per month. Calculate her debt payments-to-income ratio with and without the college loan. (Remember the 20 percent rule.) (Enter your answers as a percent rounded to 2 decimal places.) With college loan Without college loan Debt Payments-to- Income Ratioarrow_forwardStarting on July 1, 2000, Peter borrows $7,600.00$7,600.00 each year for 4 years from his dear Aunt May to pay for college. (Note: the last date that he borrows money is July 1, 2003.) From the beginning, Aunt May agreed to defer all interest on the loans until Peter finds a job; i.e. Peter's loans will not accumulate any interest until the first day he starts working. After that, Peter will be charged 8.8 percent compounded semiannually, and he will pay Aunt May back with 14 equal semiannual payments, the first coming 6 months after he starts his job. Peter finds a job as a photographer for a local newspaper, and his first day of work is July 1, 2004. For tax reasons, Peter needs to compute the total amount of interest that he will pay to Aunt May in the year 2007. How much in interest did Peter actually pay in 2007?arrow_forwardJamie Lee Jackson, age 26, is in her last semester of college and is waiting for graduation day that is just around the corner! It is the time of year again when Jamie Lee must file her annual federal income taxes. Last year, she received an increase in salary from the bakery, which brought her gross monthly earnings to $3,000, and also opened up an IRA, to which she contributed $400 last year. Her savings accounts earn 2% interest per year, and she also had received an unexpected $1,950 gift from her great aunt. Jamie was also lucky enough last year to win a raffle prize of $2,900, most of which was deposited into her regular savings account after paying off her credit card balance. Estimate Jamie Lee's current tax liability by completing the form below. Use standard deduction ($6,300) and personal exemption ($4,050). Each answer must have a value for the assignment to be complete. Enter "0" for any unused categories. Use 2021 tax rates. I put in these values, but I feel that i am…arrow_forward
- Alicia works at a call center as a 911 operator. She works part-time earning $16.45 per hour, averaging 15 to 30 hours per week, 52 weeks per year. To verify her income, she has provided you with her four most recent bi-weekly pay stubs which show her gross earnings of $674.45, $740.25, $641.55, and $822.50. Alicia became delinquent on her student loans and is currently being garnished $75.00 from each of her paychecks. What is Alicia employment income? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardJustin Granovsky, an assistant manager at a small retail shop in Morgantown, West Virginia, has an unusual amount of debt. He owes $5,400 to one bank, $1,800 to a clothing store, $2,700 to his credit union, and several hundred dollars to other stores and individuals. Justin is paying more than $460 per month on the three major obligations to pay them off when due in two years. He realized that his take-home pay of slightly more than $3,100 per month did not leave him with much excess cash. Justin discussed a different way of handling his major payments with his bank’s loan of-ficer. The officer suggested that Justin pool all of his debts and take out an $11,000 debt-consolidation loan for seven years at 14 percent interest. As a result, he would pay only $250 per month for all his debts. Justin seemed ecstatic over the idea. (a) Is Justin’s enthusiasm over the idea of a debt-consolidation loan justified? Why or why not? (b) Why can the bank offer such a “good deal” to Justin?…arrow_forwardImagine that a student graduated from college with a degree in education, and they got a full-time job in teaching. This work, which usually consists of teaching five days a week, brings in about $3,200 a month. This individual is living with their parents, but have credit card bills, car payments, student loan payments, car insurance payments, etc. Their total debt is $53,000. If they cannot make all the payments due monthly on their debts, which of the following is the best answer? They can file a Chapter 13 and the trustee in bankruptcy will reduce some of their debt and extend it over a longer time. They cannot file for bankruptcy because their debt is too low. O They cannot file for a Chapter 7 Bankruptcy. They will not qualify for a Chapter 13 Bankruptcy. none of thesearrow_forward
- Kim is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Kim is living at home and works in a shoe store, earning a gross income of $970 per month. Her employer deducts $221 for taxes from her monthly pay. Kim also pays $98 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $109 per month. Help Kim make her decision by calculating her debt payments-to-income ratio with and without the college loan. (Remember the 20 percent rule.) (Enter your answers as a percent rounded to 2 decimal places.) Debt Payments-to-Income Ratio Ratio with college loan Ratio without college loanarrow_forwardSe Ri Pak, age 23, recently graduated with her bachelor's degree in library and information sciences. She is about to take her first professional position as an archivist with a civil engineering firm in a rapidly expanding area in the U.S. Southwest. While in school, Se Ri worked part time, earning about $8000 per year. For the past two years, she has managed to put $1000 each year into an individual retirement account (IRA), Se Ri owes $15,000 in student loans on which she is obliged now to begin making payments. Her new job will pay $45,000. Se Ri may begin participating in her employer's 401(k) retirement plan immediately, and she can contribute up to 6 percent of her salary to the plan. Her employer will contribute 1/2 of 1 percent for every 1 percent that Se Ri contributes. What do you recommend to Se Ri on the importance of personal finance regarding: 3. Factoring the current state of the economy into her personal financial planning?arrow_forwardNick is a full-time college student who plans to graduate in 10 months. He works a limited number of hours each week to pay for car insurance, but he can't work more hours due to his class schedule. He is choosing between two 6-year student loans for $15,000 each. • Loan 1 has a 2.5% annual interest rate with a $224.57 monthly payment. Monthly payments are required immediately. • Loan 2 has monthly payments that are not required for 1 year, but interest accrues during that time. The annual interest is 3.5% compounded monthly. Then $238.56 monthly payments are made for 6 years. The loan Nick chooses will pay his tuition and living expenses, and it will also give him an extra $75 per month. Which loan should Nick choose and why? Nick should choose Loan 1 because the interest rate and the monthly payment are both lower. This means the total interest paid for this loan would be lower than the other one. Nick should choose Loan because no interest accrues during the first year. This means…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
