BU413 Chapter Notes - Chapter 12: Overdraft
Document Summary
Liquidity is the ability of a family to meet its debt service payments in the short run. Solvency is the ability of the family to pay its debts in the long-run. Gds = annual mortgage payments + property taxes gross family income. Tds = mortgage payments + property taxes + other debt payments gross family income. Matching principle in finance one should match the expected economic life of an asset to the term of maturity of the financing. Credit card features: the annual fee, the grace period, the interest rate charged on unpaid balances, the additional features (insurance, air miles etc. ) A line of credit is the maximum amount that you can owe at any point in time. Interest will be charged only on the amount that you have actually borrowed. The advantage of a personal credit line is that it provides a higher credit limit at a lower rate of interest than credit card financing.
