Answers1442 Personal Finance B CAPersonal LoansQuestion 9
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Personal Loans

Question 9 • 1442 Personal Finance B CA

Tom would like to take out a secured loan to help pay for a vacation this summer. He has offered his car as collateral. His car is worth $3,500. His bank can offer loans for 80% of collateral value. The vacation he has planned will cost $4,750. Approximately how much additional collateral will Tom need to offer in order to borrow enough to go on his vacation as planned?

Answer
A
$1,000.00
B
$1,362.50
C
$2,437.50
D
$2,800.00

Explanation

To borrow $4,750 at 80% of the collateral’s value, Tom needs collateral worth $4,750 ÷ 0.80 = $5,937.50. His car is worth $3,500, so he needs to offer about $5,937.50 − $3,500 = $2,437.50 in additional collateral. The correct choice is $2,437.50.

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