Question

Megan has $500 in short-term savings, $5,000 in her retirement savings account, $1,500 in credit card debt, and student loan debt of $7,500. Assuming that these are all of Megan's assets and liabilities, what is Megan's net worth?

Answer 1

5,500 because the others are debts owed.

Answer 2

The correct answer is: Negative $3,500 (-$3,500)

Explanation:

Megan's assets include her short-term savings and her retirement savings, whereas her liabilities comprises the credit card debt and student loan debt.

Megan's assets = $500 + $5,000 = $5,500

Megan's liabilities = $1,500 + $7,500 = $9,000

Megan's net worth = Megan's assets - Megan's liabilities

Megan's net worth = $5,500 - $9,000

Megan's net worth = -$3,500