Personal Finance, 14th Edition by E. Thomas Garman | Complete Solution Manual Chapters 1–17

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

,TABLE OF CONTENTS hq hq hq




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 hq hq hq




GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
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TABLE OF CONTENTS HQ HQ




Answers to Chapter Concept Checks........................................................................................................ 2
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What Do You Recommend Now? .............................................................................................................. 4
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Let’s Talk About It ..................................................................................................................................... 5
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Do the Math ................................................................................................................................................. 6
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Financial Planning Cases ............................................................................................................................ 8
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Extended Learning .................................................................................................................................... 10
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, ANSWERS TO CHAPTER CONCEPT CHECKS HQ HQ HQ HQ




LO1.1 Recognize the keys to achieving financial success.
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1. Explain the 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 fi
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nancial health to your education and career choice; (2) define your financial goals; (3) develop a plan of a
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ction to achieve your goals; (4) implement spending and saving plans to monitor and control progress to
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ward your goals; and (5) review your financial progress and make changes as appropriate.
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2. Distinguish among financial success, financial security, and financial happiness.
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Answer: Financial success is the achievement of financial aspirations that are desired, planned, or attem
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pted. Success is defined by the individual or family that seeks it. Financial success may be defined as bein
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g able to live according to one’s standard of living. Financial security is that comfortable feeling that yo
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ur financial resources will be adequate to fulfill any needs you have as well as your wants. Financial ha
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ppiness is the experience you have when you are satisfied with money matters. People who are happy ab
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out their finances will see a spillover into positive feelings about life in general.
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3. Summarize what you will accomplish studying personal finance.hq hq hq hq hq hq hq




Answer: Several things can be accomplished by studying personal finance. Recognize how to manage unex
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pected and expected financial events. Pay as little as possible in income taxes. Understand how to effectivel
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y comparison shop for vehicles and homes. Protect what we own. Invest wisely. Accumulate and protect the
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wealth that we may choose to spend during our non-working years (e.g., retirement) or donate.
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4. What are the building blocks to achieving financial success?
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Answer: The building blocks for achieving financial success include a foundation of regular income that
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provides the means to support your lifestyle and save for desired goals in the future. The foundation sup
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ports a base of various banking accounts, insurance protection, and employee benefits. Then we can esta
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blish goals, a recordkeeping system, a budget, and an emergency savings fund. We will also manage vari
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ous expenses such as housing, transportation, insurance, and the payment of taxes. We will also need to h
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andle credit, savings, and educational costs. Finally, we invest in various investment alternatives such as
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mutual funds, stocks, and bonds, often for retirement. As a result of all these building blocks, we are mor
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e apt to have a financially successful life.
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LO1.2 Understand how the economy affects your personal financial success.
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1. Summarize the phases of the business cycle. hq hq hq hq hq hq




Answer: The business cycle entails a wavelike pattern of rising and falling economic activity as measure
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d by economic indicators like unemployment rates or the gross domestic product. The phases of the busin
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ess cycle include expansion (preferred stage—
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production is high, unemployment low, interest rates low or falling, stock market and consumer demand
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high), peak, contraction, downturn, trough, and recovery.
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2. Describe two statistics that help predict the future direction of the economy.
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Answer: Forecasting the state of the economy involves predicting, estimating, or calculating what will h
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appen in advance. We need to be able to forecast the state of the economy, inflation, and interest rates so
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that we have advance warning of the directions and strength of changes in economic trends since they will
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affect our personal finances. Two statistics we could watch are the consumer confidence index (how con
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sumers feel about the economy and their personal finances) and the index of leading economic indicators
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q(composite index, averages ten components of economic growth).
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