Solution Manual for Personal Financial Planning, 16th Edition
2024 by Randy Billingsley, Lawrence J. Gitman, Verified
Chapters 1 - 15, Complete Newest Version
True or False: Pakhom's wife (the peasant wife) was openly envious of her elder
sister's fine
living in the town. - ANSWER: False
TF: As discussed in this class, a biblical view of stewardship involves only how much
we give to church. - ANSWER: False
Briefly describe the concept of progressive giving or the "graduated tithe." -
ANSWER: a believer contributes a larger proportion of their income as their income
level - and degree of faith -- rises
Which type of financial planner is more likely to face a conflict of interest,
commission-based or fee-only
planners? - ANSWER: Commission-based
What are changes in the consumer price index (CPI) supposed to measure? -
ANSWER: Inflation
TF: Over 30 years, a single lump-sum investment earning 5% will grow to be about
half the size of a single lump-sum investment of the same starting amount earning
10%. - ANSWER: False : compounding makes the difference much larger - the 5%
investment will be less than 1/4th of the 10% investment
Name one of the YNAB rules that they want to help you work toward? - ANSWER: A:
1. Give Every Dollar a Job, 2. Save for a Rainy Day / Embrace Your True Expenses, 3.
Roll With the Punches, 4. Live on Last Month's Income / Age Your Money
TF: A balance sheet describes your assets, debts, and net worth at a specific point in
time. - ANSWER: True
How do you measure Net Worth? - ANSWER: Assets minus liabilities
TF: In personal finance, assets should be recorded on the balance sheet using
historical cost. - ANSWER: False : should be recorded using fair market value
Problem to work: What is the future value (in 6 years) of a single lump sum of $5,000
invested at 5%? - ANSWER: $6,700.48
Problem to work: What is the future value (in 6 years) of $5,000 invested each year
(annually) at 5%? - ANSWER: $34,009.56 using a financial calculator.
, Problem to work: How much must you invest each year at 8% in order to accumulate
$500,000 in 30 years? (assume each investment occurs at the end of each year - the
usual assumption we make) - ANSWER: $4,413.72
Problem to work: How much must you invest in a lump sum today if you will receive
interest of 8% and you want to have $20,000 in 5 years? - ANSWER: $13,611.66 using
a financial calculator
What is the form number used to file income taxes in the US? - ANSWER: Form 1040
or some form of it
If your marginal federal income tax rate is 30%, how much do you pay in federal
income taxes on the last dollar you earn for the year? - ANSWER: 30 cents
(Semi-tricky question) If your marginal income tax rate is 15%, how much do you pay
in income taxes on the first dollar you earn for the year? - ANSWER: 0 cents - due to
exemptions and deductions of at least $10,300 if a single filer - for 2015
Problem to work: For this problem, use the 2014 tax table. (Taxable income up to
$9,075 for single filers is taxed at 10%; taxable income from that point up to $36,900
is taxed at 15%, etc.) You are single and your taxable income was $15,000 this year.
Ignoring any credits or deductions, how much do you owe in federal income taxes? -
ANSWER: (15,000 - 9,075) × 15% + (9,075 × 10%) = 5,925 × 15% + 907.50 =
$1,796.25)
Fill in the blank: In terms of taxes, if you sell a stock for more than you originally paid
for it, you realize a ______ _____ . - ANSWER: capital gain
Pick one: I am offering you $1,000 in the form of either a tax deduction or a tax
credit. If you were able to choose, which would you prefer? - ANSWER: Tax credit -
since it reduces taxes dollar for dollar. A tax deduction saves you the amount of the
deduction times your marginal tax rate, which will be a lesser amount
If you do not itemize your deductions on your tax return, you will take the _____
deduction. - ANSWER: standard
Name at least 2 examples of liquid assets. - ANSWER: a. cash b. checking accounts c.
savings accounts d. money market accounts (MMDA and MMMF) e. certificates of
deposit (CDs) f. treasury bills or savings bonds)
TF: Another name for a checking account is demand deposit account. - ANSWER:
True
Treu or False: Money market mutual funds (MMMFs) are federally insured today. -
ANSWER: False - Money market deposit accounts are insured, and for a short while
in 2008, MMMFs were insured, but they usually are no
2024 by Randy Billingsley, Lawrence J. Gitman, Verified
Chapters 1 - 15, Complete Newest Version
True or False: Pakhom's wife (the peasant wife) was openly envious of her elder
sister's fine
living in the town. - ANSWER: False
TF: As discussed in this class, a biblical view of stewardship involves only how much
we give to church. - ANSWER: False
Briefly describe the concept of progressive giving or the "graduated tithe." -
ANSWER: a believer contributes a larger proportion of their income as their income
level - and degree of faith -- rises
Which type of financial planner is more likely to face a conflict of interest,
commission-based or fee-only
planners? - ANSWER: Commission-based
What are changes in the consumer price index (CPI) supposed to measure? -
ANSWER: Inflation
TF: Over 30 years, a single lump-sum investment earning 5% will grow to be about
half the size of a single lump-sum investment of the same starting amount earning
10%. - ANSWER: False : compounding makes the difference much larger - the 5%
investment will be less than 1/4th of the 10% investment
Name one of the YNAB rules that they want to help you work toward? - ANSWER: A:
1. Give Every Dollar a Job, 2. Save for a Rainy Day / Embrace Your True Expenses, 3.
Roll With the Punches, 4. Live on Last Month's Income / Age Your Money
TF: A balance sheet describes your assets, debts, and net worth at a specific point in
time. - ANSWER: True
How do you measure Net Worth? - ANSWER: Assets minus liabilities
TF: In personal finance, assets should be recorded on the balance sheet using
historical cost. - ANSWER: False : should be recorded using fair market value
Problem to work: What is the future value (in 6 years) of a single lump sum of $5,000
invested at 5%? - ANSWER: $6,700.48
Problem to work: What is the future value (in 6 years) of $5,000 invested each year
(annually) at 5%? - ANSWER: $34,009.56 using a financial calculator.
, Problem to work: How much must you invest each year at 8% in order to accumulate
$500,000 in 30 years? (assume each investment occurs at the end of each year - the
usual assumption we make) - ANSWER: $4,413.72
Problem to work: How much must you invest in a lump sum today if you will receive
interest of 8% and you want to have $20,000 in 5 years? - ANSWER: $13,611.66 using
a financial calculator
What is the form number used to file income taxes in the US? - ANSWER: Form 1040
or some form of it
If your marginal federal income tax rate is 30%, how much do you pay in federal
income taxes on the last dollar you earn for the year? - ANSWER: 30 cents
(Semi-tricky question) If your marginal income tax rate is 15%, how much do you pay
in income taxes on the first dollar you earn for the year? - ANSWER: 0 cents - due to
exemptions and deductions of at least $10,300 if a single filer - for 2015
Problem to work: For this problem, use the 2014 tax table. (Taxable income up to
$9,075 for single filers is taxed at 10%; taxable income from that point up to $36,900
is taxed at 15%, etc.) You are single and your taxable income was $15,000 this year.
Ignoring any credits or deductions, how much do you owe in federal income taxes? -
ANSWER: (15,000 - 9,075) × 15% + (9,075 × 10%) = 5,925 × 15% + 907.50 =
$1,796.25)
Fill in the blank: In terms of taxes, if you sell a stock for more than you originally paid
for it, you realize a ______ _____ . - ANSWER: capital gain
Pick one: I am offering you $1,000 in the form of either a tax deduction or a tax
credit. If you were able to choose, which would you prefer? - ANSWER: Tax credit -
since it reduces taxes dollar for dollar. A tax deduction saves you the amount of the
deduction times your marginal tax rate, which will be a lesser amount
If you do not itemize your deductions on your tax return, you will take the _____
deduction. - ANSWER: standard
Name at least 2 examples of liquid assets. - ANSWER: a. cash b. checking accounts c.
savings accounts d. money market accounts (MMDA and MMMF) e. certificates of
deposit (CDs) f. treasury bills or savings bonds)
TF: Another name for a checking account is demand deposit account. - ANSWER:
True
Treu or False: Money market mutual funds (MMMFs) are federally insured today. -
ANSWER: False - Money market deposit accounts are insured, and for a short while
in 2008, MMMFs were insured, but they usually are no
