What is the total net worth if the banker pays off the student loans?
$219,869
$247,517
$233,693
$252,304
Answer (2)
The total net worth, after the banker pays off the student loans, is calculated to be $247,517. This result comes from adjusting the liabilities by removing the amount owed for the student loans. Therefore, the correct answer is $247,517.
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Calculate total assets: Sum the values of all owned assets.
Calculate total liabilities: Sum the values of all debts.
Determine initial net worth: Subtract total liabilities from total assets.
Calculate new net worth after paying off student loans: Subtract the new total liabilities (excluding student loans) from total assets, resulting in $247 , 517 .
Explanation
Identify Assets and Liabilities First, we need to identify all the assets and liabilities from the given table. Assets are what you own (Car Value, Savings, Bonds, Checking, Home Value), and liabilities are what you owe (Car Loan, Student Loans, Credit Card Balance).
Calculate Total Assets Next, we calculate the total assets by adding up all the asset values: 29 , 850 + 12 , 409 + 10 , 000 + 19 , 419 + 194 , 450 = 266 , 128 So, the total assets are $266,128.
Calculate Total Liabilities Then, we calculate the total liabilities by adding up all the liability values: 10 , 560 + 13 , 824 + 8 , 051 = 32 , 435 So, the total liabilities are $32,435.
Calculate Initial Net Worth Now, we calculate the initial net worth by subtracting the total liabilities from the total assets: 266 , 128 − 32 , 435 = 233 , 693 So, the initial net worth is $233,693.
Calculate New Total Liabilities If the banker pays off the student loans, the student loans are no longer a liability. So, we need to calculate the new total liabilities by subtracting the student loans from the initial total liabilities: 32 , 435 − 13 , 824 = 18 , 611 So, the new total liabilities are $18,611.
Calculate New Net Worth Finally, we calculate the new net worth by subtracting the new total liabilities from the total assets: 266 , 128 − 18 , 611 = 247 , 517 So, the new net worth is $247,517.
Final Answer Therefore, the total net worth if the banker pays off the student loans is $247,517.
Examples
Understanding net worth is crucial in personal finance. For example, knowing how paying off a loan affects your net worth helps in making informed financial decisions. Imagine you're deciding whether to invest in stocks or pay off your debt. Calculating your net worth before and after each scenario helps you see the financial impact of each choice, guiding you toward the best decision for your financial health. This problem demonstrates how reducing liabilities (like student loans) directly increases your net worth, improving your overall financial standing.
