1. What do you think of Richard's idea of borrowing to place money in the stock market?

2. Do you think the couple should refinance their mortgage?

3. Should they use the adjustable-rate mortgage offered?

4. What is your recommendation on a 30-year loan?

5. Should the couple buy a new car?

6. What do you think of Richard's view of debt?

7. Do you agree with Monica's point of view?

8. How would you treat the disagreement between Richard and Monica?

Richard and Monica have diametrically opposite points of view on debt. Richard views debt as an opportunity to generate cash to make up for past investment losses. He has asked you whether he should remortgage his house and place the proceeds in the stock market. He says the present time may be appropriate to refinance because market rates for mortgage loans of 6.5 percent are well below his mortgage rate of 8 percent. He wants to use an adjustable rate that provides an even lower 4 percent rate for the first year with rates thereafter 2 percent above the five-year Treasury rate.

Richard wants a 30-year mortgage because he said he doesn't expect "to go anywhere" and the annual repayments would be low. He said he was thinking about buying a new car. While the existing one worked well, he was tired of it. If cash flows get tight, he isn't at all averse to using credit card debt. He says that whereas credit card rates are high, the overall impact is not great and "people manage to pay money back." Monica has listened quietly to Richard with a pained expression on her face, occasionally shaking her head. She says she is afraid of taking on more debt and wants a budget to limit spending of all types?