SOLUTION MANUAL
b
Personal Finance, 14th Edition
b b b
By E. Thomas Garman, Chapter 1 - 17
b b b b b b b
,TABLEOFCONTENTS 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
Answersto Chapter Concept Checks .............................................................................................. 2
b b b b
What Do You Recommend Now? .................................................................................................... 4
b b b b
Let’sTalk About It ........................................................................................................................................................... 5
b b b
Do the Math..................................................................................................................................... 6
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FinancialPlanning Cases................................................................................................................. 8
b b
Extended Learning ....................................................................................................................... 10
b
, ANSWERSTO CHAPTER CONCEPT CHECKS B B B B
LO1.1 Recognizethe keys to achievingfinancial success.
b b b b b b b
1. Explainthe 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
b b b b b b b b b b b b b b b b b b
action to achieve your goals; (4) implement spending and saving plans to monitor and control progress
b b b b b b b b b b b b b b b b
toward your goals; and (5) review your financial progress and make changes as appropriate.
b b b b b b b b b b b b b b
2. Distinguishamongfinancial success,financial security,andfinancial happiness. b b b b b b b b
Answer: Financial success is the achievement of financial aspirations that are desired, planned, or
b b b b b b b b b b b b b
attempted. Success is defined bythe individual or familythat seeks it. Financial success maybe defined as
b b b b b b b b b b b b b b b b b b
being able to live according to one’s standard of living. Financial security is that comfortable feeling
b b b b b b b b b b b b b b b b
that your financial resources will be adequate to fulfill any needs you have as well as your wants.
b b b b b b b b b b b b b b b b b b
Financial happiness is the experience you have when you are satisfied with money matters. People
b b b b b b b b b b b b b b b
who are happy about their finances will see a spillover into positive feelings about life in general.
b b b b b b b b b b b b b b b b b
3. Summarize what you will accomplishstudying 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
b b b b b b b b b b b b b b b b
effectivelycomparison shop for vehicles and homes. Protect what we own. Invest wisely. Accumulate and
b b b b b b b b b b b b b b b
protect the wealththat we maychoose to spend duringour non-working years (e.g., retirement) or donate.
b b b b b b b b b b b b b b b b b
4. Whatare 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
b b b b b b b b b b b b b b b b b
supports a base of various banking accounts, insurance protection, and employee benefits. Then we
b b b b b b b b b b b b b b
can establish goals, a recordkeeping system, a budget, and an emergency savings fund. We will also
b b b b b b b b b b b b b b b b
manage various expenses such as housing, transportation, insurance, and the payment of taxes. We will
b b b b b b b b b b b b b b b
also need to handle credit, savings, and educational costs. Finally, we invest in various investment
b b b b b b b b b b b b b b b
alternatives such as mutual funds, stocks, and bonds, often for retirement. As a result of all these
b b b b b b b b b b b b b b b b b
building blocks, we are more apt to have a financially successful life.
b b b b b b b b b b b b
LO1.2Understandhow the economy affectsyour personalfinancial success.
b b b b b b b b b
1. Summarize the phases of the businesscycle. 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 phases
b b b b b b b b b b b b b b
of the business cycle include expansion (preferred stage—production is high, unemployment low,
b b b b b b b b b b b b
interest rates low or falling, stock market and consumer demand high), peak, contraction, downturn,
b b b b b b b b b b b b b b
trough, and recovery.
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
,TABLEOFCONTENTS 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
Answersto Chapter Concept Checks .............................................................................................. 2
b b b b
What Do You Recommend Now? .................................................................................................... 4
b b b b
Let’sTalk About It ........................................................................................................................................................... 5
b b b
Do the Math..................................................................................................................................... 6
b b
FinancialPlanning Cases................................................................................................................. 8
b b
Extended Learning ....................................................................................................................... 10
b
, ANSWERSTO CHAPTER CONCEPT CHECKS B B B B
LO1.1 Recognizethe keys to achievingfinancial success.
b b b b b b b
1. Explainthe 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
b b b b b b b b b b b b b b b b b b
action to achieve your goals; (4) implement spending and saving plans to monitor and control progress
b b b b b b b b b b b b b b b b
toward your goals; and (5) review your financial progress and make changes as appropriate.
b b b b b b b b b b b b b b
2. Distinguishamongfinancial success,financial security,andfinancial happiness. b b b b b b b b
Answer: Financial success is the achievement of financial aspirations that are desired, planned, or
b b b b b b b b b b b b b
attempted. Success is defined bythe individual or familythat seeks it. Financial success maybe defined as
b b b b b b b b b b b b b b b b b b
being able to live according to one’s standard of living. Financial security is that comfortable feeling
b b b b b b b b b b b b b b b b
that your financial resources will be adequate to fulfill any needs you have as well as your wants.
b b b b b b b b b b b b b b b b b b
Financial happiness is the experience you have when you are satisfied with money matters. People
b b b b b b b b b b b b b b b
who are happy about their finances will see a spillover into positive feelings about life in general.
b b b b b b b b b b b b b b b b b
3. Summarize what you will accomplishstudying 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
b b b b b b b b b b b b b b b b
effectivelycomparison shop for vehicles and homes. Protect what we own. Invest wisely. Accumulate and
b b b b b b b b b b b b b b b
protect the wealththat we maychoose to spend duringour non-working years (e.g., retirement) or donate.
b b b b b b b b b b b b b b b b b
4. Whatare 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
b b b b b b b b b b b b b b b b b
supports a base of various banking accounts, insurance protection, and employee benefits. Then we
b b b b b b b b b b b b b b
can establish goals, a recordkeeping system, a budget, and an emergency savings fund. We will also
b b b b b b b b b b b b b b b b
manage various expenses such as housing, transportation, insurance, and the payment of taxes. We will
b b b b b b b b b b b b b b b
also need to handle credit, savings, and educational costs. Finally, we invest in various investment
b b b b b b b b b b b b b b b
alternatives such as mutual funds, stocks, and bonds, often for retirement. As a result of all these
b b b b b b b b b b b b b b b b b
building blocks, we are more apt to have a financially successful life.
b b b b b b b b b b b b
LO1.2Understandhow the economy affectsyour personalfinancial success.
b b b b b b b b b
1. Summarize the phases of the businesscycle. 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 phases
b b b b b b b b b b b b b b
of the business cycle include expansion (preferred stage—production is high, unemployment low,
b b b b b b b b b b b b
interest rates low or falling, stock market and consumer demand high), peak, contraction, downturn,
b b b b b b b b b b b b b b
trough, and recovery.
b b b
