a
Case summary:CB a graduate, has no debt, she has to decide for purchase of new car on installment of $400 per month, it is required to determine the areas might be required to cut back to make payment of $400, it can be advised that he did not required budgetary provisions for student load and other loans given as he don’t have any debt, and it is further determined that with available disposable income it is not feasible for him to go ahead with new purchase.
Characters in the case : CB a single graduate
Adequate information: CB a fresh graduate with no debt, considering to trade in her old car for new, requiring monthly payment of $400. Looking at his budgetary estimate it is required to determine what areas he need to cut back in his budget to make budgetary provision for his plan, and it is also required to advise him about his plan.
To determine: The areas in the budget for single working person might cut back to make provision of monthly payment of $400 for new automobile.
Introduction:
Establishment of debit limit:A debit limit is the overall maximum credit one should get based on his ability to meet the repayment obligations. The recommended safe debt limit is considered to be 11 to 14 percent debt payment limits as percentage of disposable personal income, the length of time that high debt payment is also important to consider.
They are three recommended methods for you to determine the debt limit.
- Continuous-debt method under this method it is evaluated if it is difficult to get out of debt completely every four years, if yes it shows you are heavily dependent on debt.
- Debt payments-to-disposable income is a ratio of the debt payment other than mortgage loan versus disposable income, it is based upon the amount of monthly debt repayment.
- Debt-to-income method it is based on the ratio of debt to income a ratio of 36 percent or less is desirable.
b
Case summary:CB a graduate, has no debt, she has to decide for purchase of new car on installment of $400 per month, it is required to determine the areas might be required to cut back to make payment of $400, it can be advised that he did not required budgetary provisions for student load and other loans given as he don’t have any debt, and it is further determined that with available disposable income it is not feasible for him to go ahead with new purchase.
Characters in the case : CB a single graduate
Adequate information: CB a fresh graduate with no debt, considering to trade in her old car for new, requiring monthly payment of $400. Looking at his budgetary estimate it is required to determine what areas he need to cut back in his budget to make budgetary provision for his plan, and it is also required to advise him about his plan.
To determine: The amount in each area can be cut back.
Introduction:
Establishment of debit limit:A debit limit is the overall maximum credit one should get based on his ability to meet the repayment obligations. The recommended safe debt limit is considered to be 11 to 14 percent debt payment limits as percentage of disposable personal income, the length of time that high debt payment is also important to consider.
They are three recommended methods for you to determine the debt limit.
- Continuous-debt method under this method it is evaluated if it is difficult to get out of debt completely every four years, if yes it shows you are heavily dependent on debt.
- Debt payments-to-disposable income is a ratio of the debt payment other than mortgage loan versus disposable income, it is based upon the amount of monthly debt repayment.
- Debt-to-income method it is based on the ratio of debt to income a ratio of 36 percent or less is desirable.
c
Case summary:CB a graduate, has no debt, she has to decide for purchase of new car on installment of $400 per month, it is required to determine the areas might be required to cut back to make payment of $400, it can be advised that he did not required budgetary provisions for student load and other loans given as he don’t have any debt, and it is further determined that with available disposable income it is not feasible for him to go ahead with new purchase.
Characters in the case : CB a single graduate
Adequate information: CB a fresh graduate with no debt, considering to trade in her old car for new, requiring monthly payment of $400. Looking at his budgetary estimate it is required to determine what areas he need to cut back in his budget to make budgetary provision for his plan, and it is also required to advise him about his plan.
To determine: The possible alternatives for C about buying new car
Introduction:
Establishment of debit limit:A debit limit is the overall maximum credit one should get based on his ability to meet the repayment obligations. The recommended safe debt limit is considered to be 11 to 14 percent debt payment limits as percentage of disposable personal income, the length of time that high debt payment is also important to consider.
They are three recommended methods for you to determine the debt limit.
- Continuous-debt method under this method it is evaluated if it is difficult to get out of debt completely every four years, if yes it shows you are heavily dependent on debt.
- Debt payments-to-disposable income is a ratio of the debt payment other than mortgage loan versus disposable income, it is based upon the amount of monthly debt repayment.
- Debt-to-income method it is based on the ratio of debt to income a ratio of 36 percent or less is desirable.
Want to see the full answer?
Check out a sample textbook solution
Chapter 6 Solutions
Personal Finance (MindTap Course List)
- John Rossini works for a Ford dealership. Alice Field is shopping for a Taurus. She would like the high-end model with leather seats, moon roof, and other amenities, but it is beyond her budget. Alice settles on a base model, trades in her current automobile, and asks for a 36-month loan for the balance. John works out some figures. He explains to Alice that by extending the loan term to 48 months, she can buy the more expensive model while keeping her payments the same as for the cheaper mode; on a 36-month term. How do dealer and consumer both benefit from this offer?arrow_forwardMerita is shopping for a new car. She checked her budget, and is comfortable with a car payment of $425 per month. She has good credit and hopes to secure a 5-year loan at 3.15% interest. What is the maximum amount she should pay for a car to stay within her monthly payment amount. A: $ 23,564 B: 25,500 C: $23,250 D: $24,362arrow_forwardQUESTION 1 Marina had an accident with her car and the repair bill came to $900. She didn't have any emergency fund money and no extra money in her monthly budget, so she ended up borrowing from a pay-day loan company. As long as she can pay the loan back at the end of the 30 day period she won't be charged any interest, technically. However, she did have to pay an $19 processing fee per $100 that she borrowed. If she were to consider the processing fee to represent interest paid in her formula, what would she discover to be the annual interest rate she was charged on her short term loan? QUESTION 2 The end of the month has arrived and Marina was only able to save up a portion of the money she owed so far. This means she will have to delay paying off on the remaining amount. Besides the delayed payment fee that she is charged, she will now have to pay interest on the remaining amount until it is paid off. The APR (annual percentage rate) is 46.5%, but the interest is…arrow_forward
- Name :Christabella age :34 years old Saving :450,600 have car license Job :Global Banking Manager Less debt obligations Don’t have missing out on payments Monthly Income:30,000 Currently has 3 loans:Personal Loan (1,000), Housing Loan (2,500), and Car Loan (500 Assets : land(300,000), condominium(500,000) car(60,000) Now you are bank officer , Your customer christabella need to apply car loan ( BMW car it cost 300,000 ) you are required to : Make an credit worthinessof of Christabella’s car loan (you can add on the information that given to evaluate 5cs of credit of Christabella’s car loan ) explain why cristabella car loan accepted or rejected .arrow_forwardBridget Youhzi works for a large firm. Her alma mater has asked her to make a presentation to the upcoming accounting honor societys annual scholarship dinner. Her firm supports the presentation because it hopes to recruit more excellent employees like Bridget. The university is 196 miles from her office. In order to get to the dinner by 5:00 p.m., she will need to leave work at 1:00 pm. She can drive her personal car and be reimbursed $0.50 per mile. The dinner ends at 9:00 p.m. Company policy allows her to spend the night if the return trip is tour hours or more. There is a student-run inn and conference center across the street from campus that charges $101 per night. Instead of driving, she could catch a 3:00 p.m. flight that has a round, trip fare of $300. Flying would require her to rent a car for $39 per day and pay an airport parking fee of $25 for the day. The company pays a per diem of $35 for incidentals if the employee spends at least six hours out of town. (The per diem would be for one 24-hour period for either flying or driving.) As a manager, Bridget is responsible for recruiting within a budget and wants to determine which is more economical. Use the information provided to answer these questions. A. What is the total amount of expenses Bridget would include on her expense report if she drives? B. What is the total amount of expenses she would include on her expense report if she flies? C. What is the relevant cost of driving? D. What is the relevant cost of flying? E. What is the differential cost of flying over driving? F. What other factors should Bridget consider in her decision between driving and flying?arrow_forwardKen Owens Construction specializes in small additions and repairs. His normal charge is $400/day plus materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted to a bathroom. Ken has produced a bid for $5000 to complete the bathroom. He did not provide David with the details of the bid. However, they are shown here. The towns social services has asked Ken if he could reduce his bid to $4000. Should Ken accept the counter offer? B. How much would his income be reduced? C. If the towns social services guaranteed him another job next month at his normal price, could he accept this job at $4000?arrow_forward
- Blake Cohen Painting Service specializes in small paint jobs. His normal charge is $350/day plus materials. Moesha needs her basement painted. Blake has produced a bid for $1 500 to complete the basement painting. Blake completed a cost estimate for his service as shown. A. Moesha mentions that she cant pay the $1500. She is a widow and you feel an obligation to take care of widows but cant lose money. How much would you charge and still be able to make a profit? B. Moesha has asked you to paint the rest of her house. Could you continue to give her the same deal?arrow_forwardJane James owns an appliance store. She usually receives $50,000 worth ofappliances per month. She does not like to owe people money and alwayspays her bills on the day she receives the invoice. Someone told her thatif she delayed payment, she could actually increase her profit because themoney would be earning interest in her account. She went through her billsand found that she actually had an additional 10 days, on average, to payher invoices. She also found that she was earning 2 percent interest on themoney she had in her money market savings account.a. If she delayed payment by the 10 days, how much additional interest wouldshe earn for the year?b. Explain how this problem represents a disbursement float.arrow_forwardCatrina recently graduated from college with a degree in political science. She started a job that pays her $48,000 per year. Her monthly net income is $2,800. She’s moving into her own one-bedroom apartment. She has a car that she makes payments on and she pays for car insurance. She also adopted a cat, so she now has to pay for cat food and vet bills. Catrina has budgeted for the following monthly expenses based on what she expects to spend: Using the information about Catrina's proposed monthly budget above, answer the following questions. Is Catrina budget balanced? If not, what can Catrina do to balance her budget? Is Catrina following the 50, 30 and 20 spending plan in terms of savings? Explain. If Catrina decides to increase savings where would you suggest that she decrease her spending?arrow_forward
- FASTER BIKE SHOP Phil Murphy liked bikes. During a recent period of unemployment, he decided to turn his hobby into a business by opening: FASTER BIKE SHOP where he both would sell and repair bikes. Phil opened up an account at the local bank for FASTER BIKE SHOP and deposited all of his retirement money, $20,000, into the business. His friend, Sue Long, gave Phil a two-year lease on a building she owned for Phil to use as his bike shop for $12,000. To receive such a good deal on rent, he was required to pay the $12,000 up front. In addition, Phil bought some store fixtures and bicycle repair equipment for $10,000. He expected these to last for 5 years before they needed to be replaced. Phil spent $2,700 for hand tools. Because of heavy use Phil expected to need to replace the hand tools in 3 years. To get the business started Phil advertised heavily in the local newspaper. He spent $5,000 advertising Faster Bike Shop in the first month, including the grand opening. He spent…arrow_forwardCamila Torres wants to buy a new high-end audio system for her car. The system is being sold by two dealers in town, both of whom sell the equipment for the same price of $2,000. Camila can buy the equipment from Dealer A, with no money down, by making payments of $173.98 a month for 12 months; she can buy the same equipment from Dealer B by making 36 monthly payments of $66.43 (again, with no money down). Camila is considering purchasing the system from Dealer B because of the lower payment. Find the APR for Dealer A. Round the answer to 2 decimal places. % Find the APR for Dealer B. Round the answer to 2 decimal places. % What do you recommend?arrow_forwardAmy Martin is a student who plans to attend approximately four professional events a year at her college. Each event necessitates a financial outlay of $100 to $200 for a new suit and accessories. After incurring a major hit to her savings for the first event, Amy developed a different approach. She buys the suit on credit the week before the event, wears it to the event, and returns it the next week to the store for a full refund on her charge card. Required 1. Comment on the ethics exhibited by Amy and possible consequences of her actions. 2. How does the merchandising company account for the suits that Amy returns?arrow_forward
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
PFIN (with PFIN Online, 1 term (6 months) Printed...FinanceISBN:9781337117005Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning