SOLUTION MANUAL Personal Finance, 14th Edition By E. Thomas Garman, Chapter 1 - 17 A+

SOLUTION MANUAL

Personal Finance, 14th Edition

By E. Thomas Garman, Chapter 1 - 17

,TABLE OF CONTENTS h h h




Part I: FINANCIAL PLANNING.
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1. Understanding Personal Finance.
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2. Career Planning.
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3. Financial Statements, Goals, and Budgets.
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Part II: MONEY MANAGEMENT.
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4. Managing Income Taxes.
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5. Managing Checking and Savings Accounts.
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6. Building and Maintaining Good Credit.
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7. Credit Cards and Consumer Loans.
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8. Vehicles and Other Major Purchases.
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9. Obtaining Affordable Housing.
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Part III: INCOME AND ASSET PROTECTION.
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10. Managing Property and Liability Risk.
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11. Planning for Health Care Expenses.
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12. Life Insurance Planning.
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Part IV: INVESTMENTS.
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13. Investment Fundamentals.
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,14. Investing in Stocks and Bonds.
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15. Mutual and Exchange-Traded Funds.
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16. Real Estate and High-Risk Investments.
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17. Retirement and Estate Planning.
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Solution and Answer Guide h h h


GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
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TABLE OF CONTENTS
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AnswershtohChapterhConcepthChecks ........................................................................................... 2
WhathDohYouhRecommendhNow? ................................................................................................. 4
Let’shTalkhAbouthIt......................................................................................................................................................... 5
DohthehMath ................................................................................................................................... 6
FinancialhPlanninghCases ............................................................................................................... 8
ExtendedhLearning....................................................................................................................... 10

, ANSWERS TO CHAPTER CONCEPT CHECKS
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LO1.1hRecognizehthehkeyshtohachievinghfinancialhsuccess.
1. Explainhthehfivehstepshinhthehfinancialhplanninghprocess.

Answer:hThereharehfivehfundamentalhstepshtohthehpersonalhfinancialhplanninghprocess:h(1)hevaluate
hyourhfinancialhhealthhtohyourheducationhandhcareerhchoice;h(2)hdefinehyourhfinancialhgoals;h(3)hdeve

lophahplanhofhactionhtohachievehyourhgoals;h(4)himplementhspendinghandhsavinghplanshtohmonitorha
ndhcontrolhprogresshtowardhyourhgoals;handh(5)hreviewhyourhfinancialhprogresshandhmakehchangesh
ashappropriate.

2. Distinguishhamonghfinancialhsuccess,hfinancialhsecurity,handhfinancialhhappiness.

Answer:hFinancialhsuccesshishthehachievementhofhfinancialhaspirationshthatharehdesired,hplanned,h
orhattempted.hSuccesshishdefinedhbyhthehindividualhorhfamilyhthathseekshit.hFinancialhsuccesshmayhbe
hdefinedhashbeinghablehtohlivehaccordinghtohone’shstandardhofhliving.hFinancialhsecurityhishthathcom

fortablehfeelinghthathyourhfinancialhresourceshwillhbehadequatehtohfulfillhanyhneedshyouhhavehashwell
hashyourhwants.hFinancialhhappinesshishthehexperiencehyouhhavehwhenhyouharehsatisfiedhwithhmon

eyhmatters.hPeoplehwhoharehhappyhabouththeirhfinanceshwillhseehahspilloverhintohpositivehfeelingsha
bouthlifehinhgeneral.

3. Summarizehwhathyouhwillhaccomplishhstudyinghpersonalhfinance.

Answer:hSeveralhthingshcanhbehaccomplishedhbyhstudyinghpersonalhfinance.hRecognizehhowhtohmana
gehunexpectedhandhexpectedhfinancialhevents.hPayhashlittlehashpossiblehinhincomehtaxes.hUnderstandhh
owhtoheffectivelyhcomparisonhshophforhvehicleshandhhomes.hProtecthwhathwehown.hInvesthwisely.hAccu
mulatehandhprotecththehwealthhthathwehmayhchoosehtohspendhduringhourhnon-
workinghyearsh(e.g.,hretirement)horhdonate.

4. Whatharehthehbuildinghblockshtohachievinghfinancialhsuccess?

Answer:hThehbuildinghblockshforhachievinghfinancialhsuccesshincludehahfoundationhofhregularhinco
mehthathprovideshthehmeanshtohsupporthyourhlifestylehandhsavehforhdesiredhgoalshinhthehfuture.hThe
hfoundationhsupportshahbasehofhvarioushbankinghaccounts,hinsurancehprotection,handhemployeehbe

nefits.hThenhwehcanhestablishhgoals,hahrecordkeepinghsystem,hahbudget,handhanhemergencyhsavings
hfund.hWehwillhalsohmanagehvarioushexpenseshsuchhashhousing,htransportation,hinsurance,handhtheh

paymenthofhtaxes.hWehwillhalsohneedhtohhandlehcredit,hsavings,handheducationalhcosts.hFinally,hwehin
vesthinhvarioushinvestmenthalternativeshsuchhashmutualhfunds,hstocks,handhbonds,hoftenhforhretirem
ent.hAshahresulthofhallhthesehbuildinghblocks,hweharehmorehapthtohhavehahfinanciallyhsuccessfulhlife.

LO1.2hUnderstandhhowhtheheconomyhaffectshyourhpersonalhfinancialhsuccess.
1. Summarizehthehphaseshofhthehbusinesshcycle.

Answer:hThehbusinesshcyclehentailshahwavelikehpatternhofhrisinghandhfallingheconomichactivityhashm
easuredhbyheconomichindicatorshlikehunemploymenthrateshorhthehgrosshdomestichproduct.hThehpha
seshofhthehbusinesshcyclehincludehexpansionh(preferredhstage—