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.
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1. Understanding Personal Finance.
b b b
2. Career Planning.
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3. Financial Statements, Goals, and Budgets.
b b b b b
Part II: MONEY MANAGEMENT.
b b b
4. Managing Income Taxes.
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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.
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Part IV: INVESTMENTS.
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13. Investment Fundamentals.
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,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
Solution and Answer Guide 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
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Do the Math ................................................................................................................................... 6
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Financial Planning Cases ............................................................................................................... 8
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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)
b b b b b b b b b b b b
evaluate your financial health to your education and career choice; (2) define your financial
b b b b b b b b b b b b b b
goals; (3) develop a plan of action to achieve your goals; (4) implement spending and saving
b b b b b b b b b b b b b b b b
plans to monitor and control progress toward your goals; and (5) review your financial
b b b b b b b b b b b b b b
progress and make changes as appropriate.
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,
b b b b b b b b b b b b
or attempted. Success is defined by the individual or family that seeks it. Financial success may
b b b b b b b b b b b b b b b b
be defined as being able to live according to one’s standard of living. Financial security is that
b b b b b b b b b b b b b b b b b
comfortable feeling that your financial resources will be adequate to fulfill any needs you have
b b b b b b b b b b b b b b b
as well as your wants. Financial happiness is the experience you have when you are satisfied
b b b b b b b b b b b b b b b b
with money matters. People who are happy about their finances will see a spillover into
b b b b b b b b b b b b b b b
positive feelings about life in general.
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
b b b b b b b b b b b b
manage unexpected and expected financial events. Pay as little as possible in income taxes.
b b b b b b b b b b b b b b
Understand how to effectively comparison shop for vehicles and homes. Protect what we own.
b b b b b b b b b b b b b b
Invest wisely. Accumulate and protect the wealth that we may choose to spend during our non-
b b b b b b b b b b b b b b b b
working years (e.g., retirement) or donate.
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
b b b b b b b b b b b b
income that provides the means to support your lifestyle and save for desired goals in the
b b b b b b b b b b b b b b b b
future. The foundation supports a base of various banking accounts, insurance protection, and
b b b b b b b b b b b b b
employee benefits. Then we can establish goals, a recordkeeping system, a budget, and an
b b b b b b b b b b b b b b
emergency savings fund. We will also manage various expenses such as housing,
b b b b b b b b b b b b
transportation, insurance, and the payment of taxes. We will also need to handle credit,
b b b b b b b b b b b b b b
savings, and educational costs. Finally, we invest in various investment alternatives such as
b b b b b b b b b b b b b
mutual funds, stocks, and bonds, often for retirement. As a result of all these building blocks,
b b b b b b b b b b b b b b b b
we are more apt to have a financially successful life.
b b b b b b b b 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
b b b b b b b b b b b b b b
measured by economic indicators like unemployment rates or the gross domestic product. The
b b b b b b b b b b b b b
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
Solution and Answer Guide 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)
b b b b b b b b b b b b
evaluate your financial health to your education and career choice; (2) define your financial
b b b b b b b b b b b b b b
goals; (3) develop a plan of action to achieve your goals; (4) implement spending and saving
b b b b b b b b b b b b b b b b
plans to monitor and control progress toward your goals; and (5) review your financial
b b b b b b b b b b b b b b
progress and make changes as appropriate.
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,
b b b b b b b b b b b b
or attempted. Success is defined by the individual or family that seeks it. Financial success may
b b b b b b b b b b b b b b b b
be defined as being able to live according to one’s standard of living. Financial security is that
b b b b b b b b b b b b b b b b b
comfortable feeling that your financial resources will be adequate to fulfill any needs you have
b b b b b b b b b b b b b b b
as well as your wants. Financial happiness is the experience you have when you are satisfied
b b b b b b b b b b b b b b b b
with money matters. People who are happy about their finances will see a spillover into
b b b b b b b b b b b b b b b
positive feelings about life in general.
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
b b b b b b b b b b b b
manage unexpected and expected financial events. Pay as little as possible in income taxes.
b b b b b b b b b b b b b b
Understand how to effectively comparison shop for vehicles and homes. Protect what we own.
b b b b b b b b b b b b b b
Invest wisely. Accumulate and protect the wealth that we may choose to spend during our non-
b b b b b b b b b b b b b b b b
working years (e.g., retirement) or donate.
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
b b b b b b b b b b b b
income that provides the means to support your lifestyle and save for desired goals in the
b b b b b b b b b b b b b b b b
future. The foundation supports a base of various banking accounts, insurance protection, and
b b b b b b b b b b b b b
employee benefits. Then we can establish goals, a recordkeeping system, a budget, and an
b b b b b b b b b b b b b b
emergency savings fund. We will also manage various expenses such as housing,
b b b b b b b b b b b b
transportation, insurance, and the payment of taxes. We will also need to handle credit,
b b b b b b b b b b b b b b
savings, and educational costs. Finally, we invest in various investment alternatives such as
b b b b b b b b b b b b b
mutual funds, stocks, and bonds, often for retirement. As a result of all these building blocks,
b b b b b b b b b b b b b b b b
we are more apt to have a financially successful life.
b b b b b b b b 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
b b b b b b b b b b b b b b
measured by economic indicators like unemployment rates or the gross domestic product. The
b b b b b b b b b b b b b
