Solution manual for personal finance 14th edition by e thomas garman raymond e forgue

SOLUTION MANUAL
b




Personal Finance, 14th Edition
b b b




By E. Thomas Garman, Chapter 1 - 17
b b b b b b b

,TABLE OF CONTENTS b b b




Part I: FINANCIAL PLANNING.
b b b




1. Understanding Personal Finance.
b b b




2. Career Planning.
b b




3. Financial Statements, Goals, and Budgets.
b b b b b




Part II: MONEY MANAGEMENT.
b b b




4. Managing Income Taxes.
b b b




5. Managing Checking and Savings Accounts.
b b b b b




6. Building and Maintaining Good Credit.
b b b b b




7. Credit Cards and Consumer Loans.
b b b b b




8. Vehicles and Other Major Purchases.
b b b b b




9. Obtaining Affordable Housing.
b b b




Part III: INCOME AND ASSET PROTECTION.
b b b b b




10. Managing Property and Liability Risk.
b b b b b




11. Planning for Health Care Expenses.
b b b b b




12. Life Insurance Planning.
b b b




Part IV: INVESTMENTS.
b b




13. Investment Fundamentals.
b b




14. Investing in Stocks and Bonds.
b b b b b




15. Mutual and Exchange-Traded Funds.
b b b b




16. Real Estate and High-Risk Investments.
b b b b b




17. Retirement and Estate Planning.
b b b b

,SolutionandAnswerGuide b b b




GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
B B B B B B B B B B




TABLE OF CONTENTS B B




Answers to Chapter Concept Checks .......................................................................................................... 2
b b b b




What Do You Recommend Now? ................................................................................................................ 4
b b b b




Let’s Talk About It ....................................................................................................................................... 5
b b b




Do the Math .................................................................................................................................................. 6
b b




Financial Planning Cases ............................................................................................................................. 8
b b




Extended Learning .................................................................................................................................... 10
b

, ANSWERS TO CHAPTER CONCEPT CHECKS B B B B




LO1.1 Recognize the keys to achieving financial success.
b b b b b b b




1. Explain the five steps in the financial planning process.
b b b b b b b b




Answer: There are five fundamental steps to the personal financial planning process: (1) evaluate your
b b b b b b b b b b b b b b




financial health to your education and career choice; (2) define your financial goals; (3) develop a plan of action
b b b b b b b b b b b b b b b b b b b




to achieve your goals; (4) implement spending and saving plans to monitor and control progress toward your
b b b b b b b b b b b b b b b b b




goals; and (5) review your financial progress and make changes as appropriate.
b b b b b b b b b b b b




2. Distinguish among financial success, financial security, and financial happiness.
b b b b b b b b




Answer: Financial success is the achievement of financial aspirations that are desired, planned, or attempted.
b b b b b b b b b b b b b b




Success is defined by the individual or family that seeks it. Financial success may be defined as being able to live
b b b b b b b b b b b b b b b b b b b b b




according to one’s standard of living. Financial security is that comfortable feeling that your financial
b b b b b b b b b b b b b b b




resources will be adequate to fulfill any needs you have as well as your wants. Financial happiness is the
b b b b b b b b b b b b b b b b b b b




experience you have when you are satisfied with money matters. People who are happy about their finances
b b b b b b b b b b b b b b b b b




will see a spillover into positive feelings about life in general.
b b b b b b b b b b b




3. Summarize what you will accomplish studying personal finance. b b b b b b b




Answer: Several things can be accomplished by studying personal finance. Recognize how to manage
b b b b b b b b b b b b b




unexpected and expected financial events. Pay as little as possible in income taxes. Understand how to effectively
b b b b b b b b b b b b b b b b b




comparison shop for vehicles and homes. Protect what we own. Invest wisely. Accumulate and protect the wealth
b b b b b b b b b b b b b b b b b




that we may choose to spend during our non-working years (e.g., retirement) or donate.
b b b b b b b b b b b b b b




4. What are the building blocks to achieving financial success?
b b b b b b b b




Answer: The building blocks for achieving financial success include a foundation of regular income that
b b b b b b b b b b b b b b




provides the means to support your lifestyle and save for desired goals in the future. The foundation supports a
b b b b b b b b b b b b b b b b b b b




base of various banking accounts, insurance protection, and employee benefits. Then we can establish goals, a
b b b b b b b b b b b b b b b b




recordkeeping system, a budget, and an emergency savings fund. We will also manage various expenses such
b b b b b b b b b b b b b b b b




as housing, transportation, insurance, and the payment of taxes. We will also need to handle credit, savings, and
b b b b b b b b b b b b b b b b b b




educational costs. Finally, we invest in various investment alternatives such as mutual funds, stocks, and
b b b b b b b b b b b b b b b




bonds, often for retirement. As a result of all these building blocks, we are more apt to have a financially
b b b b b b b b b b b b b b b b b b b b




successful life.
b b




LO1.2 Understand how the economy affects your personal financial success.
b b b b b b b b b




1. Summarize the phases of the business cycle. b b b b b b




Answer: The business cycle entails a wavelike pattern of rising and falling economic activity as measured by
b b b b b b b b b b b b b b b b




economic indicators like unemployment rates or the gross domestic product. The phases of the business cycle
b b b b b b b b b b b b b b b b




include expansion (preferred stage—production is high, unemployment low, interest rates low or falling,
b b b b b b b b b b b b b




stock market and consumer demand high), peak, contraction, downturn, trough, and recovery.
b b b b b b b b b b b b




2. Describe two statistics that help predict the future direction of the economy.
b b b b b b b b b b b




Answer: Forecasting the state of the economy involves predicting, estimating, or calculating what will happen
b b b b b b b b b b b b b b




in advance. We need to be able to forecast the state of the economy, inflation, and interest rates so that we have
b b b b b b b b b b b b b b b b b b b b b b




advance warning of the directions and strength of changes in economic trends since they will affect our personal
b b b b b b b b b b b b b b b b b b




finances. Two statistics we could watch are the consumer confidence index (how consumers feel about the
b b b b b b b b b b b b b b b b




economy and their personal finances) and the index of leading economic indicators (composite index,
b b b b b b b b b b b b b b




averages ten components of economic growth).
b b b b b b