Solution Manual for Personal Finance, 14th Edition (Garman, Fox, & Forgue)

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

,TABLE OF CONTENTS K K K




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 K K K


GARMAN/FOX,K PERSONALK FINANCEK 14E,K CHAPTERK 1:K THINKINGK LIKEK AK FINANCIALK PLANNER


TABLE OF CONTENTSK K




AnswersKtoKChapterKConceptKChecks....................................................................................................... 2
WhatKDoKYouKRecommendKNow? ............................................................................................................. 4
Let’sKTalkKAboutKIt .................................................................................................................................... 5
DoKtheKMath ................................................................................................................................................ 6
FinancialKPlanningKCases ........................................................................................................................... 8
ExtendedKLearning ................................................................................................................................... 10

, ANSWERS TO CHAPTER CONCEPT CHECKS
K K K K




LO1.1KRecognizeKtheKkeysKtoKachievingKfinancialKsuccess.
1. ExplainKtheKfiveKstepsKinKtheKfinancialKplanningKprocess.

Answer:KThereKareKfiveKfundamentalKstepsKtoKtheKpersonalKfinancialKplanningKprocess:K(1)KevaluateKyour
KfinancialKhealthKtoKyourKeducationKandKcareerKchoice;K(2)KdefineKyourKfinancialKgoals;K(3)KdevelopKaKpla

nKofKactionKtoKachieveKyourKgoals;K(4)KimplementKspendingKandKsavingKplansKtoKmonitorKandKcontrolKpro
gressKtowardKyourKgoals;KandK(5)KreviewKyourKfinancialKprogressKandKmakeKchangesKasKappropriate.

2. DistinguishKamongKfinancialKsuccess,KfinancialKsecurity,KandKfinancialKhappiness.

Answer:KFinancialKsuccessKisKtheKachievementKofKfinancialKaspirationsKthatKareKdesired,Kplanned,KorKatte
mpted.KSuccessKisKdefinedKbyKtheKindividualKorKfamilyKthatKseeksKit.KFinancialKsuccessKmayKbeKdefinedKas
KbeingKableKtoKliveKaccordingKtoKone’sKstandardKofKliving.KFinancialKsecurityKisKthatKcomfortableKfeeling

KthatKyourKfinancialKresourcesKwillKbeKadequateKtoKfulfillKanyKneedsKyouKhaveKasKwellKasKyourKwants.KFin

ancialKhappinessKisKtheKexperienceKyouKhaveKwhenKyouKareKsatisfiedKwithKmoneyKmatters.KPeopleKwhoK
areKhappyKaboutKtheirKfinancesKwillKseeKaKspilloverKintoKpositiveKfeelingsKaboutKlifeKinKgeneral.

3. SummarizeKwhatKyouKwillKaccomplishKstudyingKpersonalKfinance.

Answer:KSeveralKthingsKcanKbeKaccomplishedKbyKstudyingKpersonalKfinance.KRecognizeKhowKtoKmanageKun
expectedKandKexpectedKfinancialKevents.KPayKasKlittleKasKpossibleKinKincomeKtaxes.KUnderstandKhowKtoKeffec
tivelyKcomparisonKshopKforKvehiclesKandKhomes.KProtectKwhatKweKown.KInvestKwisely.KAccumulateKandKprot
ectKtheKwealthKthatKweKmayKchooseKtoKspendKduringKourKnon-workingKyearsK(e.g.,Kretirement)KorKdonate.

4. WhatKareKtheKbuildingKblocksKtoKachievingKfinancialKsuccess?

Answer:KTheKbuildingKblocksKforKachievingKfinancialKsuccessKincludeKaKfoundationKofKregularKincomeKth
atKprovidesKtheKmeansKtoKsupportKyourKlifestyleKandKsaveKforKdesiredKgoalsKinKtheKfuture.KTheKfoundation
KsupportsKaKbaseKofKvariousKbankingKaccounts,KinsuranceKprotection,KandKemployeeKbenefits.KThenKweKca

nKestablishKgoals,KaKrecordkeepingKsystem,KaKbudget,KandKanKemergencyKsavingsKfund.KWeKwillKalsoKman
ageKvariousKexpensesKsuchKasKhousing,Ktransportation,Kinsurance,KandKtheKpaymentKofKtaxes.KWeKwillKalso
KneedKtoKhandleKcredit,Ksavings,KandKeducationalKcosts.KFinally,KweKinvestKinKvariousKinvestmentKalternati

vesKsuchKasKmutualKfunds,Kstocks,KandKbonds,KoftenKforKretirement.KAsKaKresultKofKallKtheseKbuildingKbloc
ks,KweKareKmoreKaptKtoKhaveKaKfinanciallyKsuccessfulKlife.

LO1.2KUnderstandKhowKtheKeconomyKaffectsKyourKpersonalKfinancialKsuccess.
1. SummarizeKtheKphasesKofKtheKbusinessKcycle.

Answer:KTheKbusinessKcycleKentailsKaKwavelikeKpatternKofKrisingKandKfallingKeconomicKactivityKasKmeasu
redKbyKeconomicKindicatorsKlikeKunemploymentKratesKorKtheKgrossKdomesticKproduct.KTheKphasesKofKtheKb
usinessKcycleKincludeKexpansionK(preferredKstage—
productionKisKhigh,KunemploymentKlow,KinterestKratesKlowKorKfalling,KstockKmarketKandKconsumerKdeman
dKhigh),Kpeak,Kcontraction,Kdownturn,Ktrough,KandKrecovery.

2. DescribeKtwoKstatisticsKthatKhelpKpredictKtheKfutureKdirectionKofKtheKeconomy.

Answer:KForecastingKtheKstateKofKtheKeconomyKinvolvesKpredicting,Kestimating,KorKcalculatingKwhatKwillK
happenKinKadvance.KWeKneedKtoKbeKableKtoKforecastKtheKstateKofKtheKeconomy,Kinflation,KandKinterestKrate
sKsoKthatKweKhaveKadvanceKwarningKofKtheKdirectionsKandKstrengthKofKchangesKinKeconomicKtrendsKsinceKt
heyKwillKaffectKourKpersonalKfinances.KTwoKstatisticsKweKcouldKwatchKareKtheKconsumerKconfidenceKindex
K(howKconsumersKfeelKaboutKtheKeconomyKandKtheirKpersonalKfinances)KandKtheKindexKofKleadingKeconom

icKindicatorsK(compositeKindex,KaveragesKtenKcomponentsKofKeconomicKgrowth).