Question

You have a car that is valued at $12,000. The balance that you owe on the car loan is $7,000. You lose your job and can not afford to make payments on your loan so you sell the car for $9,000 and pay off the loan. Explain how your net worth is affected by your actions.

Answer 1

Answer:

$2000

Step-by-step explanation:

The net worth of someone is defined as the difference of the assets you own and the debt you owe. The value of the car is $12000 and you sell it for $9000. The amount of money you owe on the care is $7000 and this is considered a debt. Therefore the total net worth is:

$9000-7000=2000$

The reason for this, is that you have de-valued the car from $12000 to $9000. This will decrease your net worth by:

$12000-9000=3000$

So instead of your net worh being $5000 it is now $2000.

Answer 2

The net worth decrease to $2,000

Since before the car was sold the net worth was $5,000 calculated as:

Net worth=Car Value -Loan balance

Net worth=$12,000-$7,000

Net worth=$5,000

Now after the car was sold out  and the loan balance was paid the net worth  will be $2,000

calculated as:

Net worth=$9,000-$7,000

Net worth=$2,000

Inconclusion net worth is affected by your actions as the net worth is Decrease to $2,000 from $5,000.

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