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Solution Manual for:
Focus on Personal Finance 12th Edition by Jack Kapoor, Les Dlabay, Robert J.
Hughes & Melissa Hart ISBN-13 978-1259720680
Chapter 1-19
Chapter 1 Problems
1. Calculating the Future Value of Property. Ben Collins plans to buy a house for $220,000. If that
real estate is expected to increase in value 3 percent each year, what would its approximate value
be seven years from now?
Solution: $220,000 1.230 = $270,600
LO: 1-2
Topic: Future value
LOD: Intermediate
Bloom tag: Apply
2. Using the Rule of 72. Using the rule of 72, approximate the following:
a. If land in an area is increasing 6 percent a year, how long will it take for property values to
double?
b. If you earn 10 percent on your investments, how long would it take for your money to double?
c. At an annual interest rate of 5 percent, how long would it take for your savings to double?
Solution: a. about 12 years (72/6)
b. about 7.2 years (72/10)
c. about 14.4 years (72/5)
LO: 1-2
Topic: Time value of money – number of periods
LOD: Basic
Bloom tag: Apply
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, asdfghjhgfghjlkjhgqwertyuiopoiuytrtyuiooiuyxcvbnmnbvcxcjhgfdsdfghjiiuytreertyi
3. Determining the Inflation Rate. In 2006, selected new automobiles had an average cost of
$16,000. The average cost of those same motor vehicles is now $28,000. What was the rate of
increase for this item between the two time periods?
Solution: ($28,000 – $16,000) / $16,000 = .75 (75 percent)
LO: 1-2
Topic: Time value of money – interest rates and inflation
LOD: Intermediate
Bloom tag: Apply
4. Computing Future Living Expenses. A family spends $48,000 a year for living expenses. If prices
increase by 2 percent a year for the next three years, what amount will the family need for its living
expenses?
Solution: $48,000 1.061 = $50,928 (Future value of single amount for 3 years at 2 percent)
LO: 1-2
Topic: Future value
LOD: Basic
Bloom tag: Apply
5. Calculating Earnings on Savings. What would be the yearly earnings for a person with $8,000 in
savings at an annual interest rate of 2.5 percent?
Solution: $8,000 .025 = $200
LO: 1-4
Topic: Time value of money – interest rates and inflation
LOD: Basic
Bloom tag: Apply
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, asdfghjhgfghjlkjhgqwertyuiopoiuytrtyuiooiuyxcvbnmnbvcxcjhgfdsdfghjiiuytreertyi
6. Computing the Time Value of Money. Using time value of money tables, calculate the following:
a. The future value of $450 six years from now at 7 percent.
b. The future value of $900 saved each year for 10 years at 8 percent.
c. The amount that a person would have to deposit today (present value) at a 6 percent interest
rate in order to have $1,000 five years from now.
d. The amount that a person would have to deposit today in order to be able to take out $600 a
year for 10 years from an account earning 8 percent.
Solution: a. $450 1.501 = $675.45
b. $900 14.487 = $13,038.30
c. $1,000 0.747 = $747
d. $600 6.710 = $4,026
LO: 1-4
Topic: Present value
LOD: Intermediate
Bloom tag: Apply
7. Calculating the Future Value of a Series of Amounts. Elaine Romberg prepares her own income
tax return each year. A tax preparer would charge her $80 for this service. Over a period of 10
years, how much does Elaine gain from preparing her own tax return. Assume she earn 3 percent
on her savings.
Solution: $80 11.464 = $917.12
LO: 1-4
Topic: Future value
LOD: Advanced
Bloom tag: Apply
8. Calculating the Time Value of Money for Savings Goals. If you desire to have $20,000 for a down
payment for a house in five years, what amount would you need to deposit today? Assume that
your money will earn 5 percent.
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, asdfghjhgfghjlkjhgqwertyuiopoiuytrtyuiooiuyxcvbnmnbvcxcjhgfdsdfghjiiuytreertyi
Solution: $20,000 x 0.784 (present value of single amount) = $15,680.
LO: 1-4
Topic: Present value
LOD: Intermediate
Bloom tag: Apply
9. Calculating the Present Value of a Series. Pete Morton is planning to go to graduate school in a
program of study that will take three years. Pete wants to have $15,000 available each year for
various school and living expenses. If he earns 4 percent on his money, how much must he
deposit at the start of his studies to be able to withdraw $15,000 a year for three years?
Solution: $15,000 x 2.775 (present value of a series) = $41,625
LO: 1-4
Topic: Present Value
LOD: Advanced
Bloom tag: Apply
10. Using the Time Value of Money for Retirement Planning. Carla Lopez deposits $3,200 a year into
her retirement account. If these funds have an average earning of 9 percent over the 40 years
until her retirement, what will be the value of her retirement account?
Solution: $3,200 x 337.890 (future value of a series) = $1,081,248
LO: 1-4
Topic: Future value
LOD: Intermediate
Bloom tag: Apply
11. Calculating the Value of Reduced Spending. If a person spends $15 a week on coffee (assume
$750 a year), what would be the future value of that amount over 10 years if the funds were
deposited in an account earning 3 percent?
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Solution Manual for:
Focus on Personal Finance 12th Edition by Jack Kapoor, Les Dlabay, Robert J.
Hughes & Melissa Hart ISBN-13 978-1259720680
Chapter 1-19
Chapter 1 Problems
1. Calculating the Future Value of Property. Ben Collins plans to buy a house for $220,000. If that
real estate is expected to increase in value 3 percent each year, what would its approximate value
be seven years from now?
Solution: $220,000 1.230 = $270,600
LO: 1-2
Topic: Future value
LOD: Intermediate
Bloom tag: Apply
2. Using the Rule of 72. Using the rule of 72, approximate the following:
a. If land in an area is increasing 6 percent a year, how long will it take for property values to
double?
b. If you earn 10 percent on your investments, how long would it take for your money to double?
c. At an annual interest rate of 5 percent, how long would it take for your savings to double?
Solution: a. about 12 years (72/6)
b. about 7.2 years (72/10)
c. about 14.4 years (72/5)
LO: 1-2
Topic: Time value of money – number of periods
LOD: Basic
Bloom tag: Apply
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, asdfghjhgfghjlkjhgqwertyuiopoiuytrtyuiooiuyxcvbnmnbvcxcjhgfdsdfghjiiuytreertyi
3. Determining the Inflation Rate. In 2006, selected new automobiles had an average cost of
$16,000. The average cost of those same motor vehicles is now $28,000. What was the rate of
increase for this item between the two time periods?
Solution: ($28,000 – $16,000) / $16,000 = .75 (75 percent)
LO: 1-2
Topic: Time value of money – interest rates and inflation
LOD: Intermediate
Bloom tag: Apply
4. Computing Future Living Expenses. A family spends $48,000 a year for living expenses. If prices
increase by 2 percent a year for the next three years, what amount will the family need for its living
expenses?
Solution: $48,000 1.061 = $50,928 (Future value of single amount for 3 years at 2 percent)
LO: 1-2
Topic: Future value
LOD: Basic
Bloom tag: Apply
5. Calculating Earnings on Savings. What would be the yearly earnings for a person with $8,000 in
savings at an annual interest rate of 2.5 percent?
Solution: $8,000 .025 = $200
LO: 1-4
Topic: Time value of money – interest rates and inflation
LOD: Basic
Bloom tag: Apply
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, asdfghjhgfghjlkjhgqwertyuiopoiuytrtyuiooiuyxcvbnmnbvcxcjhgfdsdfghjiiuytreertyi
6. Computing the Time Value of Money. Using time value of money tables, calculate the following:
a. The future value of $450 six years from now at 7 percent.
b. The future value of $900 saved each year for 10 years at 8 percent.
c. The amount that a person would have to deposit today (present value) at a 6 percent interest
rate in order to have $1,000 five years from now.
d. The amount that a person would have to deposit today in order to be able to take out $600 a
year for 10 years from an account earning 8 percent.
Solution: a. $450 1.501 = $675.45
b. $900 14.487 = $13,038.30
c. $1,000 0.747 = $747
d. $600 6.710 = $4,026
LO: 1-4
Topic: Present value
LOD: Intermediate
Bloom tag: Apply
7. Calculating the Future Value of a Series of Amounts. Elaine Romberg prepares her own income
tax return each year. A tax preparer would charge her $80 for this service. Over a period of 10
years, how much does Elaine gain from preparing her own tax return. Assume she earn 3 percent
on her savings.
Solution: $80 11.464 = $917.12
LO: 1-4
Topic: Future value
LOD: Advanced
Bloom tag: Apply
8. Calculating the Time Value of Money for Savings Goals. If you desire to have $20,000 for a down
payment for a house in five years, what amount would you need to deposit today? Assume that
your money will earn 5 percent.
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, asdfghjhgfghjlkjhgqwertyuiopoiuytrtyuiooiuyxcvbnmnbvcxcjhgfdsdfghjiiuytreertyi
Solution: $20,000 x 0.784 (present value of single amount) = $15,680.
LO: 1-4
Topic: Present value
LOD: Intermediate
Bloom tag: Apply
9. Calculating the Present Value of a Series. Pete Morton is planning to go to graduate school in a
program of study that will take three years. Pete wants to have $15,000 available each year for
various school and living expenses. If he earns 4 percent on his money, how much must he
deposit at the start of his studies to be able to withdraw $15,000 a year for three years?
Solution: $15,000 x 2.775 (present value of a series) = $41,625
LO: 1-4
Topic: Present Value
LOD: Advanced
Bloom tag: Apply
10. Using the Time Value of Money for Retirement Planning. Carla Lopez deposits $3,200 a year into
her retirement account. If these funds have an average earning of 9 percent over the 40 years
until her retirement, what will be the value of her retirement account?
Solution: $3,200 x 337.890 (future value of a series) = $1,081,248
LO: 1-4
Topic: Future value
LOD: Intermediate
Bloom tag: Apply
11. Calculating the Value of Reduced Spending. If a person spends $15 a week on coffee (assume
$750 a year), what would be the future value of that amount over 10 years if the funds were
deposited in an account earning 3 percent?
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