At the end of 2005,Phil had a net worth of $10,000.During 2008,he plans to save $2,000 and he also expects the market value of his assets to increase by 5%.If Phil's total liabilities were $4,000 at December 31,2007,his December 31,2008 net worth will be
A)$12,000.
B)$12,500.
C)$12,700.
D)$12,800.

Question

Quizplus · Accepted Answer

Phil's net worth at the end of 2007 can be calculated as his assets minus his liabilities. Given his net worth is $10,000 and his liabilities are $4,000, his assets must be $14,000 ($10,000 + $4,000). In 2008, his assets are expected to increase by 5%, which is a $700 increase ($14,000 * 0.05), and he plans to save $2,000, making his assets $16,700 ($14,000 + $700 + $2,000). Since his liabilities remain at $4,000, his net worth at the end of 2008 would be $12,700 ($16,700 - $4,000).

At the End of 2005,Phil Had a Net Worth of $10,000.During