Question

Paul has a stock portfolio worth $21,000. His home is valued at $365,000. His car is valued at $19,000. He owes $362,000 on his mortgage and $16,250 on his car loan. His credit card debt is $11,750. He owes student loans of $17,900. Paul says that because the value of his home and his car exceed their loans and his stock portfolio exceeds his credit card and student loan debt, he has a positive net worth. Complete the explanation as to whether his statement is true or not. Paul's stock portfolio the total of his credit card and student loan debt. His net worth is dollars. Therefore, Paul has a net worth, and his statement is .

Answer 1

Paul's statement is false; he has a negative net worth.

Step-by-step explanation:

Paul's statement is true, he has a positive net worth.

To calculate Paul's net worth, we subtract his debts from the total value of his assets:

• Value of his home ($365,000) minus mortgage ($362,000) = $3,000 equity
• Value of his car ($19,000) minus car loan ($16,250) = $2,750 equity
• Value of his stock portfolio ($21,000) minus credit card debt ($11,750) and student loan debt ($17,900) = -$8,650

By adding up all his equities, we get $3,000 + $2,750 + (-$8,650) = -$2,900. Therefore, Paul has a negative net worth and his statement is false.

Answer 2

Paul has negative worth of $2,900

His statement is invalid as he did not consider all assets and debts in aggregate.

Step-by-step explanation:

The net worth of Paul is the total asset owned by him less the total of debts owed by him.

Paul's total assets can computed thus:

Stock portfolio $21,000

Home worth $365,000

Car worth $19,000

Total assets $405,000

Paul's total debts can be computed as follows:

Mortgage loan $362,000

Car loan $16,250

credit card debt $11,750

Student loan $17,900

Total debts $407,900

The amount of debts owed by Paul is $2,900($405,000-$407,900) more than his asset worth,which implies that Paul is indebted to the tune of $2,900,hence has negative worth.