The Smiths are a young couple (34 and 36 years old) with two children. Use the following information from the Smiths' financial statemen To answer the questions below.

Annual take-home pay: $80,000

MBNA Credit Card (24% APR): $24.900

Monthly rent: $3,500

Minimum monthly payment on MBNA

Credit Card: $249

Monthly student loan payments: $650

Student Loan Balance (8% APR): $29,000

Monthly car payments: $1,100 (on two cars)

Car Loans (9% APR): $39,000 (outstanding balance on 2 cars)

Groceries: $590

Checking account Mr Smith balance: $11,000

Monthly transit passes (two): $250

Checking account Mrs Smith balance: $10,000

Monthly Utilities: $169

Other monthly bills: $410

RRSP (earning 6%): $128,000

Mutual Funds (earning 8%): $23,000

Required:

1) Calculate the liquidity ratio to two decimal points. (8 Points)

2) Explain what the liquidity ratio shows for the Smiths and explain whether this is of concern to them? (12 points)

second Question

Amol has finished his apprenticeship in December 2021 and just started his job as an Electrician at Nuts & Bolts & Plugs. He is 25 single. He is excited to stop living as a student and looks forward to buying himself some luxuries. His salary is $65,000, so his monthly gross income is $5,417 and his take home pay is $4,060. His financial information is below:

Savings account: $3,100

Rent on one-bedroom condo: $1,650

Checking account: $2,025

Monthly non-discretionary expenses: $230

RRSP: $12,000

Monthly discretionary expenses: $400

Investments: $2,000

Monthly credit card payment: $700

Student loans: $65,000 (3.95%)

Monthly savings contributions: $100

Credit card debt: $9,540 (15.5%)

Monthly pension contributions: $100

Monthly student loan payment: $850.

Required:

1) Calculate Amol's Debt Payment Ratio to the nearest percentage (e.g. 11%). (8 Marks):

2) Explain to Arnold what the debt ratio means in everyday language. Using this ratio and other information in the case, explain whether debt is of

concern to him or not and what financial issues he should address. (12 Marks)