Question

Mr. Chavez has assets of $250,000 and liabilities of $18,000. The Roth family has liquid assets of $10,000, use assets of $150,000 and investment assets of $34,000. They also have liabilities totaling $108,000. If their total liabilities increase by $7,000 over the next year, by how much would the Roth family need to increase their assets in order to have a net worth of $100,000?

a. $7,000
b. $14,000
c. $21,000
d. $28,000

Answer 1

The Roth family needs to increase their assets by $21,000 to achieve a net worth of $100,000 after their liabilities increase by $7,000.

Step-by-step explanation:

You asked, "By how much would the Roth family need to increase their assets in order to have a net worth of $100,000, if their total liabilities increase by $7,000 over the next year?"

The Roth family's current assets add up to their liquid assets, use assets, and investment assets, which is $10,000 + $150,000 + $34,000 = $194,000. Their current liabilities are $108,000. Therefore, their current net worth is $194,000 - $108,000 = $86,000. If their liabilities increase by $7,000, their liabilities will be $108,000 + $7,000 = $115,000.

To achieve a net worth of $100,000 with the increased liabilities, the Roth family would need assets totaling $100,000 + $115,000 = $215,000.

Hence, they need to increase their assets by $215,000 - $194,000 = $21,000 to maintain a net worth of $100,000.

The correct answer is c. $21,000.