. George Wilkins checked the spreadsheet where he keeps track of his assets and liabilities. He discovered that (i) he owes $80,000 on his house, which he believes to be worth $150,000; (ii) his car is worth $20,000, against which there is $2,000 on the remaining bank loan; (iii) his stock portfolio has risen to $50,000; (iv) he has a $10,000 balance in his bank account, which is earning a 1.2 percent annual interest rate; and (v) the value of his other belongings is $45,000. He has just received his monthly paycheck for $6,000 and he is trying to decide about taking a vacation and whether or not to pay off his car loan. His monthly expenses are $3,000 which includes the interest expense on his auto loan. He has two possible vacation choices: the Bahamas for $2,000 or a local beach for $1,000. If he has any money left over at the end of the month, it will go into his bank account. If he doesn’t have enough money to cover all of his expenses for the month, he will sell enough of his stock to cover the excess expenses.

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Sra

To determine whether George Wilkins can afford to take a vacation and pay off his car loan, we need to analyze his current financial situation and calculate his available funds after considering his expenses and income.

1. Calculate George's total assets:
- House worth: $150,000
- Car worth: $20,000
- Stock portfolio value: $50,000
- Bank account balance: $10,000
- Other belongings value: $45,000

Total assets = $150,000 + $20,000 + $50,000 + $10,000 + $45,000 = $275,000

2. Calculate George's liabilities:
- House mortgage: $80,000
- Remaining car loan: $2,000

Total liabilities = $80,000 + $2,000 = $82,000

3. Calculate George's net worth:
Net worth = Total assets - Total liabilities
= $275,000 - $82,000
= $193,000

4. Calculate George's monthly income (paycheck):
Monthly income = $6,000

5. Calculate George's monthly expenses:
- Monthly expenses (including auto loan interest): $3,000
- Vacation expenses (Bahamas or local beach): $2,000 or $1,000

6. Calculate George's available funds after deducting expenses:
Available funds = Monthly income - Monthly expenses - Vacation expenses

If George chooses the Bahamas:
Available funds = $6,000 - $3,000 - $2,000
= $1,000

If George chooses the local beach:
Available funds = $6,000 - $3,000 - $1,000
= $2,000

7. Determine if George can afford to pay off his car loan:
If George chooses the Bahamas:
Available funds after Bahamas expenses = $1,000

If George chooses the local beach:
Available funds after local beach expenses = $2,000 - $2,000 (car loan)
= $0

If George has any money left over at the end of the month, it will go into his bank account. If he doesn’t have enough money to cover all expenses, he will sell enough of his stock to cover the excess expenses.

Based on the calculations, George can afford to take a vacation to the Bahamas but would not have enough funds to pay off his car loan. If he chooses the local beach, he will have exactly enough funds to cover his expenses, including the car loan.