SOLUTION MANUAL FOR
Focus on Personal Finance, 7th Edition by Jack Kapoor, Les Dlabay, Robert J.
Hughes and Melissa Hart
All Chapter 1-14
Chapter 1
(Note: Some of these problems require the use of the time value of money tables in the chapter
appendix, a financial calculator, or spreadsheet software.)
1. Using the rule of 72, approximate the following amounts. (LO 1.1)
a. If the value of land in an area is increasing 6 percent a year, how long will it taḳe for property
values to double?
About 12 years ()
b. If you earn 10 percent on your investments, how long will it taḳe for your money to double?
About 7.2 years ()
c. At an annual interest rate of 5 percent, how long will it taḳe for your savings to double?
About 14.4 years ()
2. In 2019, selected automobiles had an average cost of $16,000. The average cost of those same
automobiles is now $20,000. What was the rate of increase for these automobiles between the two
time periods? (LO 1.1)
($20,000 - $16,000) / $16,000 = .25 (25 percent)
3. A family spends $46,000 a year for living expenses. If prices increase by 3 percent a year for the next
three years, what amount will the family need for their living expenses after three years? (LO 1.1)
46,000 1.09 = $50,140; or using Exhibit 1-A: $46,000 1.093 = $50,278
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
,4. Ben Collins plans to buy a house for $260,000. If the real estate in his area is expected to increase in
value by 2 percent each year, what will its approximate value be seven years from now? (LO 1.1)
$260,000 1.149 = $298,740; or using Exhibit 1-A: $260,000 1.149 = $298,740
5. What would be the yearly earnings for a person with $9,000 in savings at an annual interest rate of
1.5 percent? (LO 1.3)
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
, $9,000 0.015 = $135
6. Using time value of money tables (Exhibit 1–3 or chapter appendix tables), calculate the following.
(LO 1.3)
a. The future value of $550 six years from now at 7 percent.
$550 1.501 = $825.55 (Exhibit 1-A)
b. The future value of $900 saved each year for 10 years at 8 percent.
$900 14.487 = $13,038.30 (Exhibit 1-B)
c. The amount a person would have to deposit today (present value) at a 5 percent interest rate to
have $1,000 five years from now.
$1,000 0.784 = $784 (Exhibit 1-C)
d. The amount a person would have to deposit today to be able to taḳe out $500 a year for 10 years
from an account earning 8 percent.
$500 6.710 = $3,355 (Exhibit 1-D)
7. If you desire to have $12,000 for a down payment for a house in five years, what amount would you
need to deposit today? Assume that your money will earn 4 percent. (LO 1.3)
$12,000 0.822 = $9,864 (Exhibit 1-C)
8. Pete Morton is planning to go to graduate school in a program of study that will taḳe three years.
Pete wants to have $8,000 available each year for various school and living expenses. If he earns 3
percent on his money, how much must he deposit at the start of his studies to be able to withdraw
$8,000 a year for three years? (LO 1.3)
$8,000 2.829 = $22,632 (Exhibit 1-D)
9. Carla Lopez deposits $2,800 a year into her retirement account. If these funds have an average
earning of 7 percent over the 40 years until her retirement, what will be the value of her retirement
account? (LO 1.3)
$2,800 199.635 = $558,978 (Exhibit 1-B)
10. If a person spends $10 a weeḳ on coffee (assume $500 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? (LO 1.3)
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
, $500 11.464 = $5,732 (Exhibit 1-B)
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Focus on Personal Finance, 7th Edition by Jack Kapoor, Les Dlabay, Robert J.
Hughes and Melissa Hart
All Chapter 1-14
Chapter 1
(Note: Some of these problems require the use of the time value of money tables in the chapter
appendix, a financial calculator, or spreadsheet software.)
1. Using the rule of 72, approximate the following amounts. (LO 1.1)
a. If the value of land in an area is increasing 6 percent a year, how long will it taḳe for property
values to double?
About 12 years ()
b. If you earn 10 percent on your investments, how long will it taḳe for your money to double?
About 7.2 years ()
c. At an annual interest rate of 5 percent, how long will it taḳe for your savings to double?
About 14.4 years ()
2. In 2019, selected automobiles had an average cost of $16,000. The average cost of those same
automobiles is now $20,000. What was the rate of increase for these automobiles between the two
time periods? (LO 1.1)
($20,000 - $16,000) / $16,000 = .25 (25 percent)
3. A family spends $46,000 a year for living expenses. If prices increase by 3 percent a year for the next
three years, what amount will the family need for their living expenses after three years? (LO 1.1)
46,000 1.09 = $50,140; or using Exhibit 1-A: $46,000 1.093 = $50,278
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
,4. Ben Collins plans to buy a house for $260,000. If the real estate in his area is expected to increase in
value by 2 percent each year, what will its approximate value be seven years from now? (LO 1.1)
$260,000 1.149 = $298,740; or using Exhibit 1-A: $260,000 1.149 = $298,740
5. What would be the yearly earnings for a person with $9,000 in savings at an annual interest rate of
1.5 percent? (LO 1.3)
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
, $9,000 0.015 = $135
6. Using time value of money tables (Exhibit 1–3 or chapter appendix tables), calculate the following.
(LO 1.3)
a. The future value of $550 six years from now at 7 percent.
$550 1.501 = $825.55 (Exhibit 1-A)
b. The future value of $900 saved each year for 10 years at 8 percent.
$900 14.487 = $13,038.30 (Exhibit 1-B)
c. The amount a person would have to deposit today (present value) at a 5 percent interest rate to
have $1,000 five years from now.
$1,000 0.784 = $784 (Exhibit 1-C)
d. The amount a person would have to deposit today to be able to taḳe out $500 a year for 10 years
from an account earning 8 percent.
$500 6.710 = $3,355 (Exhibit 1-D)
7. If you desire to have $12,000 for a down payment for a house in five years, what amount would you
need to deposit today? Assume that your money will earn 4 percent. (LO 1.3)
$12,000 0.822 = $9,864 (Exhibit 1-C)
8. Pete Morton is planning to go to graduate school in a program of study that will taḳe three years.
Pete wants to have $8,000 available each year for various school and living expenses. If he earns 3
percent on his money, how much must he deposit at the start of his studies to be able to withdraw
$8,000 a year for three years? (LO 1.3)
$8,000 2.829 = $22,632 (Exhibit 1-D)
9. Carla Lopez deposits $2,800 a year into her retirement account. If these funds have an average
earning of 7 percent over the 40 years until her retirement, what will be the value of her retirement
account? (LO 1.3)
$2,800 199.635 = $558,978 (Exhibit 1-B)
10. If a person spends $10 a weeḳ on coffee (assume $500 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? (LO 1.3)
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
, $500 11.464 = $5,732 (Exhibit 1-B)
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
