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# Applied Math 40S May 15, 2008

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Introduction to Net Worth.

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### Applied Math 40S May 15, 2008

1. 1. How much are you worth? (Net Worth) Money Suit by ﬂickr user zoomar
2. 2. N= I%= PV= PMT= FV= P/Y= C/Y= PMT: END BEGIN
3. 3. N= I%= PV= PMT= FV= P/Y= C/Y= PMT: END BEGIN
4. 4. Mr. T’s family has decided to buy a larger home, and the date of possession is April 1. HOMEWORK The price of the home is \$135 000, and he has \$45 000 as a down payment. He will buy homeowners insurance on the new home for \$425, but will receive a refund of \$300 from his previous home insurance policy. He has the new home appraised by a real estate agent, and the fee is \$250. The bank requires a land survey which costs \$550. His legal fees, including land transfer taxes and disbursements, are \$875.The movers charged \$1200 for moving his furniture and other belongings, and the company he works for paid half of this. The family decided to install new carpets into part of the house at a cost of \$2400 plus PST and GST (7% each). He did the installation himself, and so there were no installation charges. They also bought a new fridge for \$940 plus PST and GST (7% each) to replace the old one that did not ﬁt into the new kitchen. The previous owner had paid the property taxes of \$2350 for the period January 1 to December 31, and he had to pay for his share of the taxes. The cost of hooking up telephone and TV are \$45. Determine the additional costs of moving for Mr. T and his family.
5. 5. Ms. Johnston has decided to buy a home. She requires a \$65 000 mortgage. The mortgage interest rate is 7.75%, and she will repay the mortgage with monthly payments. She needs to decide whether she will select a 20- or 15-year amortization term. How much do her monthly payments increase, and how much money will she save if she chooses a 15-year term instead of a 20-year term? Would you advise Ms. Johnston to get a 15- or 20-year mortgage? Why? HOMEWORK
6. 6. The Meaning of Net Worth Net Worth is the difference between your assets and your liabilities. The term assets refers to the value of everything you own, including any cash or bank deposits, material goods, and investments. A liability is any debt you need to pay. Net worth = Assets - Liabilities Equity is the same as net worth. Note that equity and 'total assets' are not the same.
7. 7. Assets When completing a Net Worth Statement (which will be shown later), it is useful to subdivide the assets into three categories:
8. 8. Assets When completing a Net Worth Statement (which will be shown later), it is useful to subdivide the assets into three categories: 1. Liquid Assets: These include cash accounts (i.e., your chequing and savings accounts), T-bills, money market funds -- any money you can get at quickly and without penalty. This is money available in case of emergency, and also in case of investment opportunities.
9. 9. Assets When completing a Net Worth Statement (which will be shown later), it is useful to subdivide the assets into three categories: 1. Liquid Assets: These include cash accounts (i.e., your chequing and savings accounts), T-bills, money market funds -- any money you can get at quickly and without penalty. This is money available in case of emergency, and also in case of investment opportunities. 2. Semi-Liquid Assets: These include longer-term investments such as stocks, bonds, mutual funds, RRSPs, or real estate. These investments are intended to provide for major future needs such as purchasing a house or retirement.
10. 10. Assets When completing a Net Worth Statement (which will be shown later), it is useful to subdivide the assets into three categories: 1. Liquid Assets: These include cash accounts (i.e., your chequing and savings accounts), T-bills, money market funds -- any money you can get at quickly and without penalty. This is money available in case of emergency, and also in case of investment opportunities. 2. Semi-Liquid Assets: These include longer-term investments such as stocks, bonds, mutual funds, RRSPs, or real estate. These investments are intended to provide for major future needs such as purchasing a house or retirement. 3. Non-Liquid Assets: These include material goods such as your house, car, computer, and other personal property. These items are intended for your long-term personal use, and are not easily converted to cash.
11. 11. Liabilities Liabilities are divided into two types:
12. 12. Liabilities Liabilities are divided into two types: 1. Short-Term Debts: These are debts that must be paid within the next 12 months. These include credit card debts, consumer loans, and smaller personal debts.
13. 13. Liabilities Liabilities are divided into two types: 1. Short-Term Debts: These are debts that must be paid within the next 12 months. These include credit card debts, consumer loans, and smaller personal debts. 2. Long-Term Debts: These are used for two purposes: • to pay for investments such as real estate, including your home • to pay for major purchases such as a summer cottage, motor home, or car