Question

You have a car that is valued at $12,000. The balance that you owe on the car loan is $7,000. You lose your job and can not afford to make payments on your loan so you sell the car for $9,000 and pay off the loan. Explain how your net worth is affected by your actions.

Answer 1

As a result of such situation, you have reduced your net worth. Before selling the car, your net worth is $12,000-$7,000=$5,000. After selling the car and paying off the loan, it’s $2,000. As you can see it reduced $3,000. Hope this answers the question. Have a nice day.

Answer 2

Answer:

$2000

Step-by-step explanation:

The net worth of someone is defined as the difference of the assets you own and the debt you owe. The value of the car is $12000 and you sell it for $9000. The amount of money you owe on the care is $7000 and this is considered a debt. Therefore the total net worth is:

$9000-7000=2000$

The reason for this, is that you have de-valued the car from $12000 to $9000. This will decrease your net worth by:

$12000-9000=3000$

So instead of your net worh being $5000 it is now $2000.