Question

The assets and liabilities of a 22-year-old recent college graduate are listed below.

Furniture $4,091
Car Loan $6,060
Credit Card Balances $3,940
Savings Account Balance $2,143
Student Loans $29,400
Car Value $21,500
Equipment $4,805


The college graduate is hired at a law firm with a $10,000 signing bonus, that will be deposited into the savings account. The firm also agrees to immediately pay off $25,000 in student loan debt. What is the college graduate's new net worth?
$11,309
$14,400
$23,643
$28,139

Answer 1

The net worth of an individual is calculated as the difference between their total assets and their total liabilities.

Before the signing bonus and student loan payment, the net worth of the college graduate can be calculated as:

Net worth = (Furniture + Car Value + Equipment + Savings Account Balance) - (Car Loan + Credit Card Balances + Student Loans)

Net worth = ($4,091 + $21,500 + $4,805 + $2,143) - ($6,060 + $3,940 + $29,400)

Net worth = $32,539 - $39,400

Net worth = -$6,861

This means that the college graduate has a negative net worth before the signing bonus and student loan payment.

After the signing bonus and student loan payment, the new net worth can be calculated as:

New net worth = (Furniture + Car Value + Equipment + Savings Account Balance + Signing Bonus) - (Car Loan + Credit Card Balances + Student Loans - Student Loan Payment)

New net worth = ($4,091 + $21,500 + $4,805 + $2,143 + $10,000) - ($6,060 + $3,940 + $29,400 - $25,000)

New net worth = $42,539 - $14,400

New net worth = $28,139

Therefore, the college graduate's new net worth is $28,139. The answer is option (D).