Chapter 6, Problem 4FPC

a

Summary Introduction

Case summary:CB a graduate, has no debt, she has to decide for purchase of new car on installment of $400 per month, it is required to determine the areas might be required to cut back to make payment of $400, it can be advised that he did not required budgetary provisions for student load and other loans given as he don’t have any debt, and it is further determined that with available disposable income it is not feasible for him to go ahead with new purchase.

Characters in the case : CB a single graduate

Adequate information: CB a fresh graduate with no debt, considering to trade in her old car for new, requiring monthly payment of $400. Looking at his budgetary estimate it is required to determine what areas he need to cut back in his budget to make budgetary provision for his plan, and it is also required to advise him about his plan.

To determine: The areas in the budget for single working person might cut back to make provision of monthly payment of $400 for new automobile.

Introduction:

Establishment of debit limit:A debit limit is the overall maximum credit one should get based on his ability to meet the repayment obligations. The recommended safe debt limit is considered to be 11 to 14 percent debt payment limits as percentage of disposable personal income, the length of time that high debt payment is also important to consider.

They are three recommended methods for you to determine the debt limit.

1. Continuous-debt method under this method it is evaluated if it is difficult to get out of debt completely every four years, if yes it shows you are heavily dependent on debt.
2. Debt payments-to-disposable income is a ratio of the debt payment other than mortgage loan versus disposable income, it is based upon the amount of monthly debt repayment.
3. Debt-to-income method it is based on the ratio of debt to income a ratio of 36 percent or less is desirable.

b

Summary Introduction

Case summary:CB a graduate, has no debt, she has to decide for purchase of new car on installment of $400 per month, it is required to determine the areas might be required to cut back to make payment of $400, it can be advised that he did not required budgetary provisions for student load and other loans given as he don’t have any debt, and it is further determined that with available disposable income it is not feasible for him to go ahead with new purchase.

Characters in the case : CB a single graduate

Adequate information: CB a fresh graduate with no debt, considering to trade in her old car for new, requiring monthly payment of $400. Looking at his budgetary estimate it is required to determine what areas he need to cut back in his budget to make budgetary provision for his plan, and it is also required to advise him about his plan.

To determine: The amount in each area can be cut back.

Introduction:

Establishment of debit limit:A debit limit is the overall maximum credit one should get based on his ability to meet the repayment obligations. The recommended safe debt limit is considered to be 11 to 14 percent debt payment limits as percentage of disposable personal income, the length of time that high debt payment is also important to consider.

They are three recommended methods for you to determine the debt limit.

1. Continuous-debt method under this method it is evaluated if it is difficult to get out of debt completely every four years, if yes it shows you are heavily dependent on debt.
2. Debt payments-to-disposable income is a ratio of the debt payment other than mortgage loan versus disposable income, it is based upon the amount of monthly debt repayment.
3. Debt-to-income method it is based on the ratio of debt to income a ratio of 36 percent or less is desirable.

c

Summary Introduction

Case summary:CB a graduate, has no debt, she has to decide for purchase of new car on installment of $400 per month, it is required to determine the areas might be required to cut back to make payment of $400, it can be advised that he did not required budgetary provisions for student load and other loans given as he don’t have any debt, and it is further determined that with available disposable income it is not feasible for him to go ahead with new purchase.

Characters in the case : CB a single graduate

Adequate information: CB a fresh graduate with no debt, considering to trade in her old car for new, requiring monthly payment of $400. Looking at his budgetary estimate it is required to determine what areas he need to cut back in his budget to make budgetary provision for his plan, and it is also required to advise him about his plan.

To determine: The possible alternatives for C about buying new car

Introduction:

Establishment of debit limit:A debit limit is the overall maximum credit one should get based on his ability to meet the repayment obligations. The recommended safe debt limit is considered to be 11 to 14 percent debt payment limits as percentage of disposable personal income, the length of time that high debt payment is also important to consider.

They are three recommended methods for you to determine the debt limit.

1. Continuous-debt method under this method it is evaluated if it is difficult to get out of debt completely every four years, if yes it shows you are heavily dependent on debt.
2. Debt payments-to-disposable income is a ratio of the debt payment other than mortgage loan versus disposable income, it is based upon the amount of monthly debt repayment.
3. Debt-to-income method it is based on the ratio of debt to income a ratio of 36 percent or less is desirable.