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.

Accepted Solution

Answer:$2000Step-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:[tex]9000-7000=2000[/tex]The reason for this, is that you have de-valued the car from $12000 to $9000. This will decrease your net worth by:[tex]12000-9000=3000[/tex]So instead of your net worh being $5000 it is now $2000.