Question 1:

Answer question 1-6 on the basis of the following information. Ignore taxes.

At the end of the month, after all current bills and short term obligations for the period have been paid, Bill notices that he has the following balances in his ledgers:

Monthly Wages	3,500
Current Market Value of Car	28,000
Car Loan Balance	17,500
Monthly Rent	2,000
Monthly car payment	450
Credit Card Balance	6,200
Cash	2,850
Monthly Interest Expense	250
Illiquid Investment Assets	6,000
Checking Account	3,700
Monthly Clothing Expense	150
Savings Account	6,250
Monthly Investment Income	200
Money Market Account	6,200
Monthly Grocery Bill	450
Certificate of Deposit	6,500
Monthly gasoline expense	200

How rich is Bill?

______________

Question 2:What is Bill's liquidity ratio? (A CD is too illiquid to be included in this calculation.)

Question 3: How liquid is Bill?

A) Far too liquid! Should reallocate 75% - 80% of his liquid assets to earn higher returns.

B) Way too illiquid! It will be expensive if he has any unanticipated expenses.

C)Liquid enough. Should probably start seeking higher returns with new savings, especially if Bill's income is stable for the long term. But if his income is erratic or otherwise unstable, he might consider becoming a little more liquid.

D) Bill's degree of liquidity cannot be determined from the information provided.

Question 4: How solvent is Bill?

A) Barely solvent, any unforeseen expense or reduction in the value of any of his assets would make him insolvent.

B) Insolvent

C) Quite solvent, but you can never be too solvent.

D)There is no way to determine his solvency from the information given.

Question 5: What was Bill's net gain last month?

________________

Question 6:

Suppose our tax structure was composed of two marginal tax brackets. The first was a 10% tax on everything from $0 - 10,000 and the second was 50% on everything above $10,000. There were no deductions, exclusions -- none of that. What would be the tax owed by an individual who made $10,100?

Tax owed = $___________