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That is all the information provided. 3) Suppose you are 40 years old. Your only debt is a mortgage = $450,000. The current value of
That is all the information provided.
3) Suppose you are 40 years old. Your only debt is a mortgage = $450,000. The current value of your house = $500,000. You expect to work another 20 years, earning $100,000 per year. You have accumulated $80,000 in financial assets that you plan to spend when you retire. a) What is the value of your home equity? b) What is the value of your Net worth (or material wealth) c) What is the (present) value of expected future earnings from employment (you can assume you discount earnings at an interest rate = 0%). (d) What is the value of your Broad wealth? Are you a millionaire? Would you consider yourself to be a multi-millionaire? e) Why can your home be used as collateral but your expected future earning cannot be used as collateral? 3) Suppose you are 40 years old. Your only debt is a mortgage = $450,000. The current value of your house = $500,000. You expect to work another 20 years, earning $100,000 per year. You have accumulated $80,000 in financial assets that you plan to spend when you retire. a) What is the value of your home equity? b) What is the value of your Net worth (or material wealth) c) What is the (present) value of expected future earnings from employment (you can assume you discount earnings at an interest rate = 0%). (d) What is the value of your Broad wealth? Are you a millionaire? Would you consider yourself to be a multi-millionaire? e) Why can your home be used as collateral but your expected future earning cannot be used as collateralStep by Step Solution
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