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In the Appendix to this chapter (especially Exhibit A-2) you are given household balance sheet information relating to the U.S. household sector’s financial assets and liabilities

In the Appendix to this chapter (especially Exhibit A-2) you are given household balance sheet information relating to the U.S. household sector’s financial assets and liabilities
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FINANCE

FIN 350 Module 1: Assignments

Chapter 3 Problems and Issues 4

4. In the Appendix to this chapter (especially Exhibit A-2) you are given household balance sheet information relating to the U.S. household sector’s financial assets and liabilities. Households also possess nonfinancial assets, the bulk of which is housing. Use the information presented below along with the information in Exhibit A-2 to examine how housing has affected U.S. household wealth since 1980.

U.S. Household Balance Sheet Items ($billions) 1980 1990 2000 2006
Total Household Sector Assets 10,914.70 23,915.60 48,772.20 65,705.90
Total Nonfinancial Assets of Households 4,359.70 9,353.00 15,806.80 25,780.40
Value of Housing Assets 2,943.20 6,578.50 11,411.90 19,926.10

a. For each of the years: 1980, 1990, 2000, and 2006, please place into a spreadsheet the following information: Total Assets, Total Nonfinacial Assets, Total Housing, Total Liabilities, and Total Mortgages.
b. For each year, determine what percentage of Total Assets is made up of Housing.
c. For each year, determine what percentage of Total Liabilities is made up of Mortgages.
d. For each year, compute the net equity that U.S. households have in their home by subtracting Mortgages (liability) from Housing (asset).
e. For each year, compute U.S. households’ Net Worth = Total Assets Less Total Liabilities.
f. For each year, compute the percentage of households’ Net Worth that is made up of net equity in their homes.
g. Describe the principle trends in the make-up of U.S. households’ balance sheet that you observe and try to explain why these trends are occurring. What role might the development of the financial information marketplace play in the trends you observe?

 

FILE: MS WORD

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