Please Answer questions 8 and 9

Jeff and Mary Douglas, a couple in their mid-30s, have two children - Paul age 6 and Marcy age 7. The Douglas' do not have substantial assets and have not yet reached their peak earning years, Jeff is a general manager of a jewelry manufacturer in Providence, RI while Mary teaches at the local elementary school in the town of Tiverton RI. The family needs both incomes to meet their normal living expenses and to meet unforeseen emergency purchases. Their cash flow situation is tight, and they have had difficulty growing a "nest egg through savings and investing. Jeff and Mary have discussed the needs of their two children who are typical, healthy, and active kids. They have discussed trying to have Mary stay at home, be with the kids more and run the household but her income is very much needed, and she also wants a career and doesn't want to put her teaching job on hold to be a stay-at-home mother. Jeff also wants (and needs) to work and his job often requires long days - beyond the 9-5 grind. Now that both children are in school there is no day care need and Mary's job schedule matches nicely with the children's schedule, so she not only wants to continue to work but is thinking about completing a graduate degree. Currently, Mary can take most of the summer off from teaching (when the children are home on vacation) and so she enjoys a great deal of flexibility in the summer and spends quite a bit of time with the children in the summer Jeff is the breadwinner of the family, but Mary's contribution is also very significant. Jeff earns about 65% of the total household income with Mary earning the remainder. By completing a graduate degree, Mary could increase her salary by at least 20% but she would need to commit to a continuing education program at either Providence College or University of Rhode Island, Although their net worth is not substantial, they have big dreams and aspirations. Their personal financial objectives relate to goals for a high standard of living. They want to help their children go to good colleges, a goal that they share with their own parents (the grandparents who want to help fund that dream). Jeff and Mary want to accumulate significant assets that allow for a comfortable retirement. Both are in excellent health and have family histories of long-life expectancies. Their retirements (at age 65 or so) could be a period of 20 or more years, Current Financial Information They own their home which they purchased two years ago for $285.000. Their town (Rumford, Rhode Island) tax office has assessed the home value at $200.000. Recently Mary hued a certified real estate appraiser to prepare a home appraisal and his appraised value was $300.000 (the real estate appraiser based her opinion of value on recent sales of comparable homes in similar ne shbonngods and considered current construction costs and land value.) While surfing the wel. Mary noticed that their home is listed on Zillow.com with a Zestimate of $350.000. Zestimates we powered by an algorithm. Mary knows that the variables of the valuation system, including analysis or home anterior and interior and traditional real estate acts and figures images can be inaccurate and may be updating however Mary logs into Zillow ofter to see how the system is valuing one of the families wees and most important asset The mortgage on the home has a balance of $140,000. A review of the Douglas' financial information, bank statements, and other documents shows the following as of Dec. 31. 2021: 2015 Camry worth about $11,000 (Kelly Blue Book), with a bank loan balance of $3.000 2014 Volvo S60 purchased six months ago for $14,500 is worth about $15.000 (Kelly Blue Book). with a bank loan balance of $10,000 An insurance policy on Jeff's life with a face value of $100,000 with a cash surrender value of $2,500 and no policy loan balance. Mary is the beneficiary listed on Jeff's policy An insurance policy on Mary's life with a face value of $10,000 and no cash surrender value. Jeff is the beneficiary listed on Mary's policy. Credit card balances that total $3,500. A savings account with a $1,000 balance, Two mutual funds earmarked for the children's college education. The account for Paul has a balance of $10,000 and Marcy's has $11,000 as a current balance. The fund has averaged an 8% annual rate of return over its life. 100 shares of Apple Inc. (NASDAQ: stock symbol = AAPL), formerly Apple Computer Inc. You need to value this stock and all the stocks they own based on the Dec 31, 2021 price per share. You will need to find that on the Internet. The cost basis is $120 per share, 200 shares of AT&T. The cost basis is $41 a share. 50 shares of Microsoft. The cost basis is $158 per share. 75 shares of Alphabet Inc. The cost basis is $1,600 per share A checking account with a balance of $3.000. Jeff estimates that their furniture, fixtures etc. in the home are worth about 2000, . Jeff and Mary have retirement accounts that have a current market value of approximately $200,000. Mary still has an education loan with an outstanding balance of $15.000 has seven years left on it. . A vacation loan of sy so due in 6 months and a home improvement loan oro due veas (unsecured not a home equity loan.) Jeft wants to finish the basement and he has discussed this at length with Mary. He is getting estimates from contractors based on ideas that both he and Mary have to create a play area for the children and a TV/den for the family. Jeff and Mary love to play ping pong and pool and would love to introduce the children to both "sports." He believes that the project will cost about $30.000 and he is interested in tapping into the home equity. Jeff is also an avid baseball fan and is looking at buying a membership to a local baseball/softball facility for both Paul and Marcy. He figures that since he doesn't have any expensive hobbies, it would be fun to get Paul started as a baseball player and Marcy as a softball player. The membership costs and related costs are as follows: $1,500 per year (covers both kids), equipment $500 per year, and team registration and travel costs will be about another $1,000 to $2,000 a year depending on how serious the kids become. Mary is not sure that this is a priority at this point and wants to explore this possibility in more detailGeneral instructions Question 8. Jeff is considering applying for a home equity loan to finance the basement project. What is the maximum home equity loan the Douglas could possibly get based only on equity (and ignoring cash flow considerations)? Assume that a bank is willing to loan up to 80% of the value of the home (between the mortgage and the home equity loan). Question 9. Home equity loans have many advantages. For example, the home equity loan may be the source of funds to help Jeff and Mary finish their basement. The interest on the loan will be tax deductible. The arrangement that Jeff and Mary are looking at will involve a 15-year payback period and would allow for them to draw down on any unused funds in a credit line arrangement. Please describe two disadvantages of a home equity loan and recommend an amount that Jeff and Mary should request for their line of credit. A B D F 10 11 12 8. Maximum Home Equity Loan 13 14 Value of Home 15 80% of Value 16 Less: Mortgage Balance 17 Maximum Home Equity 18 19 20 9. Disadvantages 21 22 23 24 25 26 27 28 20