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Use the following information to answer the 3 questions below (questions 5-7): ...
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Use the following information to answer the 3 questions below (questions 5-7):
The Simpsons have a yearly household income of $48,000 per year after deductions.
Their monthly expenses are as follows:
Entertainment
|
$300
|
|
Utilities
|
$250
|
|
Life and disability insurance
|
$200
|
|
Groceries
|
$350
|
|
Clothes
|
$250
|
|
Mortgage payment
|
$700
|
(principal, interest and property taxes)
|
Car loan payments
|
$100
|
(for the next 20 months)
|
Car insurance
|
$150
|
|
Holiday loan payments
|
$150
|
(for the next 6.67 months)
|
Total
|
$2,450
|
per month
|
The Simpsons have the following assets:
Chequing
Savings
|
$10,000
$2,000
|
Home
|
$150,000
|
Two cars
|
$10,000
|
Furniture
|
$10,000
|
Cottage
|
$40,000
|
Retirement savings
|
$35,000
|
Total Assets:
|
$257,000
|
The Simpsons have debt as follows:
Mortgage on their residential property:
|
$100,000
|
Car loans (long term debt) totaling:
|
$20,000
|
Current debt (holiday loan)
|
$1,000
|
Total Debt:
|
$121,000
|
5. Based on the Simpsons’ monthly expenses coverage (short term debt servicing) ratio, they should be able to pay bills for, approximately, how many months if they lose their income sources: