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1. A few years ago, Simon Powell purchased a home for $110,000. Today, the home is worth $150,000. His remaining mortgage balance is $50,000. Assuming that Simon can borrow up to 80 percent of the market value, what is the maximum amount he can borrow?

2. Robert Sampson owns a $140,000 townhouse and still has an unpaid mortgage of $110,000. In addition to his mortgage, he has the following liabilities:

Visa $565

MasterCard 480

Discover card 395

Education loan 920

Personal bank loan 800

Auto loan 4,250

Total $7,410

Roberts net worth (not including his home) is about $21,000. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property. What is Roberts debt-to-equity ratio? Has he reached the upper limit of debt obligations? Explain.

3. Joshua borrowed $500 for one year and paid $50 in interest. The bank charged him a $5 service charge. What is the finance charge on this loan?

4. Sidney took a $200 cash advance by using checks linked to her credit card account. The bank charges a 2 percent cash advance fee on the amount borrowed and offers no grace period on cash advances. Sidney paid the balance in full when the bill arrived. What was the cash advance fee? What was the interest for one month at an 18 percent APR? What was the total amount she paid? What if she had made the purchase with her credit card and paid off her bill in full promptly?

5. Brooke lacks cash to pay for a $600 washing machine. She could buy it from the store on credit by making 12 monthly payments of $52.74 each. The total cost would then be $632.88. Instead, Brooke decides to deposit $50 a month in the bank until she has saved enough money to pay cash for the washing machine. One year later, she has saved $642$600 in deposits plus interest. When she goes back to the store, she finds that the washing machine now costs $660. Its price has gone up 10 percentthe current rate of inflation. Was postponing her purchase a good trade-off for Brooke?

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