SOLUTION MANUAL
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Personal Finance, 14th Edition
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By E.Thomas Garman, Chapter 1 - 17
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,TABLEOFCONTENTS d d d
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.
d d d d d
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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SolutionandAnswerGuide d d d
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
D D D D D D D D D D
TABLE OF CONTENTS D D
Answersto Chapter Concept Checks .............................................................................................. 2
d d d d
What Do You Recommend Now? .................................................................................................... 4
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Let’sTalk About It ........................................................................................................................................................... 5
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Do the Math..................................................................................................................................... 6
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FinancialPlanning Cases................................................................................................................. 8
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Extended Learning ....................................................................................................................... 10
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, ANSWERSTO CHAPTER CONCEPT CHECKS D D D D
LO1.1 Recognizethe keys to achievingfinancial success.
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1. Explainthe five steps in the financial planning process.
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Answer: There are five fundamental steps to the personal financial planning process: (1) evaluate your
d d d d d d d d d d d d d d
financial health to your education and career choice; (2) define your financial goals; (3) develop a plan of
d d d d d d d d d d d d d d d d d d
action to achieve your goals; (4) implement spending and saving plans to monitor and control progress
d d d d d d d d d d d d d d d d
toward your goals; and (5) review your financial progress and make changes as appropriate.
d d d d d d d d d d d d d d
2. Distinguishamongfinancial success,financial security,andfinancial happiness. d d d d d d d d
Answer: Financial success is the achievement of financial aspirations that are desired, planned, or
d d d d d d d d d d d d d
attempted. Success is defined bythe individual or family that seeks it. Financial success maybe defined as
d d d d d d d d d d d d d d d d d d
being able to live according to one’s standard of living. Financial security is that comfortable feeling
d d d d d d d d d d d d d d d d
that your financial resources will be adequate to fulfill any needs you have as well as your wants.
d d d d d d d d d d d d d d d d d d
Financial happiness is the experience you have when you are satisfied with money matters. People
d d d d d d d d d d d d d d d
who are happy about their finances will see a spillover into positive feelings about life in general.
d d d d d d d d d d d d d d d d d
3. Summarize what you will accomplishstudying personal finance. d d d d d d d
Answer: Several things can be accomplished by studying personal finance. Recognize how to manage
d d d d d d d d d d d d d
unexpected and expected financial events. Pay as little as possible in income taxes. Understand how to
d d d d d d d d d d d d d d d d
effectivelycomparison shop for vehicles and homes. Protect what we own. Invest wisely. Accumulate and
d d d d d d d d d d d d d d d
protect the wealththat we maychoose to spend duringour non-working years (e.g., retirement) or donate.
d d d d d d d d d d d d d d d d d
4. Whatare the building blocks to achieving financial success?
d d d d d d d d
Answer: The building blocks for achieving financial success include a foundation of regular income that
d d d d d d d d d d d d d d
provides the means to support your lifestyle and save for desired goals in the future. The foundation
d d d d d d d d d d d d d d d d d
supports a base of various banking accounts, insurance protection, and employee benefits. Then we
d d d d d d d d d d d d d d
can establish goals, a recordkeeping system, a budget, and an emergency savings fund. We will also
d d d d d d d d d d d d d d d d
manage various expenses such as housing, transportation, insurance, and the payment of taxes. We will
d d d d d d d d d d d d d d d
also need to handle credit, savings, and educational costs. Finally, we invest in various investment
d d d d d d d d d d d d d d d
alternatives such as mutual funds, stocks, and bonds, often for retirement. As a result of all these
d d d d d d d d d d d d d d d d d
building blocks, we are more apt to have a financially successful life.
d d d d d d d d d d d d
LO1.2Understandhow the economy affectsyour personalfinancial success.
d d d d d d d d d
1. Summarize the phases of the businesscycle. d d d d d d
Answer: The business cycle entails a wavelike pattern of rising and falling economic activity as
d d d d d d d d d d d d d d
measured by economic indicators like unemployment rates or the gross domestic product. The phases
d d d d d d d d d d d d d d
of the business cycle include expansion (preferred stage—production is high, unemployment low,
d d d d d d d d d d d d
interest rates low or falling, stock market and consumer demand high), peak, contraction, downturn,
d d d d d d d d d d d d d d
trough, and recovery.
d d d
d
Personal Finance, 14th Edition
d d d
By E.Thomas Garman, Chapter 1 - 17
d d d d d d d
,TABLEOFCONTENTS d d d
Part I: FINANCIAL PLANNING.
d d d
1. Understanding Personal Finance.
d d d
2. Career Planning.
d d
3. Financial Statements, Goals, and Budgets.
d d d d d
Part II: MONEY MANAGEMENT.
d d d
4. Managing Income Taxes.
d d d
5. Managing Checking and Savings Accounts.
d d d d d
6. Building and Maintaining Good Credit.
d d d d d
7. Credit Cards and Consumer Loans.
d d d d d
8. Vehicles and Other Major Purchases.
d d d d d
9. Obtaining Affordable Housing.
d d d
Part III: INCOME AND ASSET PROTECTION.
d d d d d
10. Managing Property and Liability Risk.
d d d d d
11. Planning for Health Care Expenses.
d d d d d
12. Life Insurance Planning.
d d d
Part IV: INVESTMENTS.
d d
13. Investment Fundamentals.
d d
,14. Investing in Stocks and Bonds.
d d d d d
15. Mutual and Exchange-Traded Funds.
d d d d
16. Real Estate and High-Risk Investments.
d d d d d
17. Retirement and Estate Planning.
d d d d
SolutionandAnswerGuide d d d
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
D D D D D D D D D D
TABLE OF CONTENTS D D
Answersto Chapter Concept Checks .............................................................................................. 2
d d d d
What Do You Recommend Now? .................................................................................................... 4
d d d d
Let’sTalk About It ........................................................................................................................................................... 5
d d d
Do the Math..................................................................................................................................... 6
d d
FinancialPlanning Cases................................................................................................................. 8
d d
Extended Learning ....................................................................................................................... 10
d
, ANSWERSTO CHAPTER CONCEPT CHECKS D D D D
LO1.1 Recognizethe keys to achievingfinancial success.
d d d d d d d
1. Explainthe five steps in the financial planning process.
d d d d d d d d
Answer: There are five fundamental steps to the personal financial planning process: (1) evaluate your
d d d d d d d d d d d d d d
financial health to your education and career choice; (2) define your financial goals; (3) develop a plan of
d d d d d d d d d d d d d d d d d d
action to achieve your goals; (4) implement spending and saving plans to monitor and control progress
d d d d d d d d d d d d d d d d
toward your goals; and (5) review your financial progress and make changes as appropriate.
d d d d d d d d d d d d d d
2. Distinguishamongfinancial success,financial security,andfinancial happiness. d d d d d d d d
Answer: Financial success is the achievement of financial aspirations that are desired, planned, or
d d d d d d d d d d d d d
attempted. Success is defined bythe individual or family that seeks it. Financial success maybe defined as
d d d d d d d d d d d d d d d d d d
being able to live according to one’s standard of living. Financial security is that comfortable feeling
d d d d d d d d d d d d d d d d
that your financial resources will be adequate to fulfill any needs you have as well as your wants.
d d d d d d d d d d d d d d d d d d
Financial happiness is the experience you have when you are satisfied with money matters. People
d d d d d d d d d d d d d d d
who are happy about their finances will see a spillover into positive feelings about life in general.
d d d d d d d d d d d d d d d d d
3. Summarize what you will accomplishstudying personal finance. d d d d d d d
Answer: Several things can be accomplished by studying personal finance. Recognize how to manage
d d d d d d d d d d d d d
unexpected and expected financial events. Pay as little as possible in income taxes. Understand how to
d d d d d d d d d d d d d d d d
effectivelycomparison shop for vehicles and homes. Protect what we own. Invest wisely. Accumulate and
d d d d d d d d d d d d d d d
protect the wealththat we maychoose to spend duringour non-working years (e.g., retirement) or donate.
d d d d d d d d d d d d d d d d d
4. Whatare the building blocks to achieving financial success?
d d d d d d d d
Answer: The building blocks for achieving financial success include a foundation of regular income that
d d d d d d d d d d d d d d
provides the means to support your lifestyle and save for desired goals in the future. The foundation
d d d d d d d d d d d d d d d d d
supports a base of various banking accounts, insurance protection, and employee benefits. Then we
d d d d d d d d d d d d d d
can establish goals, a recordkeeping system, a budget, and an emergency savings fund. We will also
d d d d d d d d d d d d d d d d
manage various expenses such as housing, transportation, insurance, and the payment of taxes. We will
d d d d d d d d d d d d d d d
also need to handle credit, savings, and educational costs. Finally, we invest in various investment
d d d d d d d d d d d d d d d
alternatives such as mutual funds, stocks, and bonds, often for retirement. As a result of all these
d d d d d d d d d d d d d d d d d
building blocks, we are more apt to have a financially successful life.
d d d d d d d d d d d d
LO1.2Understandhow the economy affectsyour personalfinancial success.
d d d d d d d d d
1. Summarize the phases of the businesscycle. d d d d d d
Answer: The business cycle entails a wavelike pattern of rising and falling economic activity as
d d d d d d d d d d d d d d
measured by economic indicators like unemployment rates or the gross domestic product. The phases
d d d d d d d d d d d d d d
of the business cycle include expansion (preferred stage—production is high, unemployment low,
d d d d d d d d d d d d
interest rates low or falling, stock market and consumer demand high), peak, contraction, downturn,
d d d d d d d d d d d d d d
trough, and recovery.
d d d
