SOLUTION MANUAL
b6
Personal Finance, 14th Edition
b6 b6 b6
By E. Thomas Garman, Chapter 1 - 17
b6 b6 b6 b6 b6 b6 b6
,TABLE OF CONTENTS b6 b6 b6
Part I: FINANCIAL PLANNING.
b6 b6 b6
1. Understanding Personal Finance.
b6 b6 b6
2. Career Planning.
b6 b6
3. Financial Statements, Goals, and Budgets.
b6 b6 b6 b6 b6
Part II: MONEY MANAGEMENT.
b6 b6 b6
4. Managing Income Taxes.
b6 b6 b6
5. Managing Checking and Savings Accounts.
b6 b6 b6 b6 b6
6. Building and Maintaining Good Credit.
b6 b6 b6 b6 b6
7. Credit Cards and Consumer Loans.
b6 b6 b6 b6 b6
8. Vehicles and Other Major Purchases.
b6 b6 b6 b6 b6
9. Obtaining Affordable Housing.
b6 b6 b6
Part III: INCOME AND ASSET PROTECTION.
b6 b6 b6 b6 b6
10. Managing Property and Liability Risk.
b6 b6 b6 b6 b6
11. Planning for Health Care Expenses.
b6 b6 b6 b6 b6
12. Life Insurance Planning.
b6 b6 b6
Part IV: INVESTMENTS.
b6 b6
13. Investment Fundamentals.
b6 b6
,14. Investing in Stocks and Bonds.
b6 b6 b6 b6 b6
15. Mutual and Exchange-Traded Funds.
b6 b6 b6 b6
16. Real Estate and High-Risk Investments.
b6 b6 b6 b6 b6
17. Retirement and Estate Planning.
b6 b6 b6 b6
Solution and Answer Guide b6 b6 b6
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
B6 B 6 B 6 B 6 B 6 B6 B 6 B 6 B 6 B 6
TABLE OF CONTENTS B6 B6
Answers to Chapter Concept Checks ........................................................................................ 2
b6 b6 b6 b6
What Do You Recommend Now? ............................................................................................. 4
b6 b6 b6 b6
Let’s Talk About It ..................................................................................................................................................... 5
b6 b6 b6
Do the Math ................................................................................................................................. 6
b6 b6
Financial Planning Cases.............................................................................................................. 8
b6 b6
Extended Learning ...................................................................................................................... 10
b6
, ANSWERS TO CHAPTER CONCEPT CHECKS B6 B6 B6 B6
LO1.1 Recognize the keys to achieving financial success.
b6 b6 b6 b6 b6 b6 b6
1. Explain the five steps in the financial planning process.
b6 b6 b6 b6 b6 b6 b6 b6
Answer: There are five fundamental steps to the personal financial planning process: (1)
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
evaluate your financial health to your education and career choice; (2) define your
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
financial goals; (3) develop a plan of action to achieve your goals; (4) implement
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
spending and saving plans to monitor and control progress toward your goals; and (5)
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
review your financial progress and make changes as appropriate.
b6 b6 b6 b6 b6 b6 b6 b6 b6
2. Distinguish among financial success, financial security, and financial happiness.
b6 b6 b6 b6 b6 b6 b6 b6
Answer: Financial success is the achievement of financial aspirations that are desired,
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
planned, or attempted. Success is defined by the individual or family that seeks it.
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
Financial success may be defined as being able to live according to one’s standard of
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
living. Financial security is that comfortable feeling that your financial resources will be
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
adequate to fulfill any needs you have as well as your wants. Financial happiness is
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
the experience you have when you are satisfied with money matters. People who are
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
happy about their finances will see a spillover into positive feelings about life in
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
general.
b6
3. Summarize what you will accomplish studying personal finance.
b6 b6 b6 b6 b6 b6 b6
Answer: Several things can be accomplished by studying personal finance. Recognize how
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
to manage unexpected and expected financial events. Pay as little as possible in income
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
taxes. Understand how to effectively comparison shop for vehicles and homes. Protect what
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
we own. Invest wisely. Accumulate and protect the wealth that we may choose to spend
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
during our non-working years (e.g., retirement) or donate.
b6 b6 b6 b6 b6 b6 b6 b6
4. What are the building blocks to achieving financial success?
b6 b6 b6 b6 b6 b6 b6 b6
Answer: The building blocks for achieving financial success include a foundation of
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
regular income that provides the means to support your lifestyle and save for desired
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
goals in the future. The foundation supports a base of various banking accounts,
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
insurance protection, and employee benefits. Then we can establish goals, a
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
recordkeeping system, a budget, and an emergency savings fund. We will also manage
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
various expenses such as housing, transportation, insurance, and the payment of taxes.
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
We will also need to handle credit, savings, and educational costs. Finally, we invest in
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
various investment alternatives such as mutual funds, stocks, and bonds, often for
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
retirement. As a result of all these building blocks, we are more apt to have a
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
financially successful life.
b6 b6 b6
LO1.2 Understand how the economy affects your personal financial success.
b6 b6 b6 b6 b6 b6 b6 b6 b6
1. Summarize the phases of the business cycle.
b6 b6 b6 b6 b6 b6
b6
Personal Finance, 14th Edition
b6 b6 b6
By E. Thomas Garman, Chapter 1 - 17
b6 b6 b6 b6 b6 b6 b6
,TABLE OF CONTENTS b6 b6 b6
Part I: FINANCIAL PLANNING.
b6 b6 b6
1. Understanding Personal Finance.
b6 b6 b6
2. Career Planning.
b6 b6
3. Financial Statements, Goals, and Budgets.
b6 b6 b6 b6 b6
Part II: MONEY MANAGEMENT.
b6 b6 b6
4. Managing Income Taxes.
b6 b6 b6
5. Managing Checking and Savings Accounts.
b6 b6 b6 b6 b6
6. Building and Maintaining Good Credit.
b6 b6 b6 b6 b6
7. Credit Cards and Consumer Loans.
b6 b6 b6 b6 b6
8. Vehicles and Other Major Purchases.
b6 b6 b6 b6 b6
9. Obtaining Affordable Housing.
b6 b6 b6
Part III: INCOME AND ASSET PROTECTION.
b6 b6 b6 b6 b6
10. Managing Property and Liability Risk.
b6 b6 b6 b6 b6
11. Planning for Health Care Expenses.
b6 b6 b6 b6 b6
12. Life Insurance Planning.
b6 b6 b6
Part IV: INVESTMENTS.
b6 b6
13. Investment Fundamentals.
b6 b6
,14. Investing in Stocks and Bonds.
b6 b6 b6 b6 b6
15. Mutual and Exchange-Traded Funds.
b6 b6 b6 b6
16. Real Estate and High-Risk Investments.
b6 b6 b6 b6 b6
17. Retirement and Estate Planning.
b6 b6 b6 b6
Solution and Answer Guide b6 b6 b6
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
B6 B 6 B 6 B 6 B 6 B6 B 6 B 6 B 6 B 6
TABLE OF CONTENTS B6 B6
Answers to Chapter Concept Checks ........................................................................................ 2
b6 b6 b6 b6
What Do You Recommend Now? ............................................................................................. 4
b6 b6 b6 b6
Let’s Talk About It ..................................................................................................................................................... 5
b6 b6 b6
Do the Math ................................................................................................................................. 6
b6 b6
Financial Planning Cases.............................................................................................................. 8
b6 b6
Extended Learning ...................................................................................................................... 10
b6
, ANSWERS TO CHAPTER CONCEPT CHECKS B6 B6 B6 B6
LO1.1 Recognize the keys to achieving financial success.
b6 b6 b6 b6 b6 b6 b6
1. Explain the five steps in the financial planning process.
b6 b6 b6 b6 b6 b6 b6 b6
Answer: There are five fundamental steps to the personal financial planning process: (1)
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
evaluate your financial health to your education and career choice; (2) define your
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
financial goals; (3) develop a plan of action to achieve your goals; (4) implement
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
spending and saving plans to monitor and control progress toward your goals; and (5)
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
review your financial progress and make changes as appropriate.
b6 b6 b6 b6 b6 b6 b6 b6 b6
2. Distinguish among financial success, financial security, and financial happiness.
b6 b6 b6 b6 b6 b6 b6 b6
Answer: Financial success is the achievement of financial aspirations that are desired,
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
planned, or attempted. Success is defined by the individual or family that seeks it.
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
Financial success may be defined as being able to live according to one’s standard of
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
living. Financial security is that comfortable feeling that your financial resources will be
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
adequate to fulfill any needs you have as well as your wants. Financial happiness is
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
the experience you have when you are satisfied with money matters. People who are
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
happy about their finances will see a spillover into positive feelings about life in
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
general.
b6
3. Summarize what you will accomplish studying personal finance.
b6 b6 b6 b6 b6 b6 b6
Answer: Several things can be accomplished by studying personal finance. Recognize how
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
to manage unexpected and expected financial events. Pay as little as possible in income
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
taxes. Understand how to effectively comparison shop for vehicles and homes. Protect what
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
we own. Invest wisely. Accumulate and protect the wealth that we may choose to spend
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
during our non-working years (e.g., retirement) or donate.
b6 b6 b6 b6 b6 b6 b6 b6
4. What are the building blocks to achieving financial success?
b6 b6 b6 b6 b6 b6 b6 b6
Answer: The building blocks for achieving financial success include a foundation of
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
regular income that provides the means to support your lifestyle and save for desired
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
goals in the future. The foundation supports a base of various banking accounts,
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
insurance protection, and employee benefits. Then we can establish goals, a
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
recordkeeping system, a budget, and an emergency savings fund. We will also manage
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
various expenses such as housing, transportation, insurance, and the payment of taxes.
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
We will also need to handle credit, savings, and educational costs. Finally, we invest in
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
various investment alternatives such as mutual funds, stocks, and bonds, often for
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
retirement. As a result of all these building blocks, we are more apt to have a
b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6 b6
financially successful life.
b6 b6 b6
LO1.2 Understand how the economy affects your personal financial success.
b6 b6 b6 b6 b6 b6 b6 b6 b6
1. Summarize the phases of the business cycle.
b6 b6 b6 b6 b6 b6
