SOLUTION MANUAL
ii
Personal Finance, 14th Edition
ii ii ii
By E. Thomas Garman, Chapter 1 - 17
ii ii ii ii ii ii ii
,TABLE OF CONTENTS
43 43
Part43I:43 FINANCIAL43PLANNING.
1. Understanding43Personal43Finance.
2. Career43 Planning.
3. Financial43Statements,43Goals,43and43Budge
ts.43Part43II:43MONEY43MANAGEMENT.
4. Managing43Income43Taxes.
5. Managing43Checking43and43Savings43Accounts.
6. Building43and43Maintaining43Good43Credit.
7. Credit43Cards43 and43Consumer43Loans.
8. Vehicles43and43Other43 Major43Purchases.
9. Obtaining43Affordable43Housing.
Part43III:43INCOME43 AND43 ASSET43PROTECTION.
10. Managing43Property43and43Liability43Risk.
11. Planning43for43Health43 Care43 Expenses.
12. Life43Insurance43Plannin
g.43Part43IV:43INVESTMENTS.
13. Investment43Fundamentals.
,14. Investing43in43Stocks43 and43 Bonds.
15. Mutual43and43Exchange-Traded43Funds.
16. Real43 Estate43and43High-Risk43 Investments.
17. Retirement43and43Estate43Planning.
SolutionandAnswerGuide
GARMAN/FOX,4 3 PERSONAL FINANCE 14E,4 3 CHAPTER 1:4 3 THINKING LIKE A4 3 4 3 FINANCIAL
PLANNER
TABLE43 OF43CONTENTS
43
Answers4 3 to4 3 Chapter4 3 Concept4 3 Checks ............................................................................... 2
What4 3 Do4 3 You4 3 Recommend4 3 Now? .................................................................................... 4
Let’s4 3 Talk4 3 About4 3 It ................................................................................................................. 5
Do4 3 the4 3 Math ............................................................................................................................. 6
Financial43 Planning4 3 Cases .......................................................................................................... 8
Extended4 3 Learning.................................................................................................................... 10
, ANSWERS43TO43CHAPTER43CONCEPT43CHECKS
LO1.14 3 Recognize4 3 the4 3 keys4 3 to4 3 achieving4 3 financial4 3 success.
1. Explain43 the4 3 five4 3 steps4 3 in4 3 the4 3 financial4 3 planning4 3 process.
Answer:4 3 There4 3 are4 3 five4 3 fundamental4 3 steps4 3 to4 3 the4 3 personal4 3 financial4 3 planni
ng4 3 process:4 3 (1)43evaluate4 3 your4 3 financial4 3 health4 3 to4 3 your4 3 education4 3 and4 3 caree
r4 3 choice;4 3 (2)4 3 define4 3 your4 3 financial43goals;4 3 (3)4 3 develop4 3 a4 3 plan4 3 of4 3 action4 3 t
o4 3 achieve4 3 your4 3 goals;4 3 (4)4 3 implement4 3 spending4 3 and43saving4 3 plans4 3 to4 3 monit
or4 3 and4 3 control4 3 progress4 3 toward4 3 your4 3 goals;4 3 and4 3 (5)4 3 review4 3 your43financial
4 3 progress4 3 and4 3 make4 3 changes4 3 as4 3 appropriate.
2. Distinguish43among43financial4 3 success,43financial43security,4 3 and43financial43happ
iness.43Answer:4 3 Financial4 3 success4 3 is4 3 the4 3 achievement4 3 of4 3 financial4 3 aspirati
ons4 3 that4 3 are4 3 desired,
planned,4 3 or4 3 attempted.4 3 Success4 3 is4 3 defined4 3 by4 3 the4 3 individual4 3 or4 3 family4 3 that4 3 see
ks4 3 it.4 3 Financial
success4 3 may4 3 be4 3 defined4 3 as4 3 being4 3 able4 3 to4 3 live4 3 according4 3 to4 3 one’s4 3 sta
ndard4 3 of4 3 living.43Financial4 3 security4 3 is4 3 that4 3 comfortable4 3 feeling4 3 that4 3 your
4 3 financial4 3 resources4 3 will4 3 be43adequate4 3 to4 3 fulfill4 3 any4 3 needs4 3 you4 3 have4 3 as
4 3 well4 3 as4 3 your4 3 wants.4 3 Financial4 3 happiness4 3 is4 3 the43experience4 3 you4 3 have4 3
when4 3 you4 3 are4 3 satisfied4 3 with4 3 money4 3 matters.4 3 People4 3 who4 3 are4 3 happy43abo
ut4 3 their4 3 finances4 3 will4 3 see4 3 a4 3 spillover4 3 into4 3 positive4 3 feelings4 3 about4 3 life4 3 i
n4 3 general.
3. Summarize4 3 what4 3 you4 3 will4 3 accomplish4 3 studying4 3 personal4 3 finance.
Answer:4 3 Several4 3 things4 3 can4 3 be4 3 accomplished4 3 by4 3 studying4 3 personal4 3 finance.4 3 R
ecognize4 3 how4 3 to43manage4 3 unexpected4 3 and4 3 expected4 3 financial4 3 events.4 3 Pay4 3 as4 3
little4 3 as4 3 possible4 3 in4 3 income4 3 taxes.43Understand4 3 how4 3 to4 3 effectively43comparison4 3
shop4 3 for4 3 vehicles4 3 and4 3 homes.4 3 Protect4 3 what4 3 we4 3 own.43Invest4 3 wisely.4 3 Accumulat
e4 3 and4 3 protect4 3 the4 3 wealth4 3 that4 3 we4 3 may4 3 choose4 3 to4 3 spend4 3 during4 3 our43non-
working4 3 years43(e.g.,43retirement)43or43donate.
4. What4 3 are4 3 the4 3 building4 3 blocks4 3 to4 3 achieving4 3 financial4 3 success?
Answer:4 3 The4 3 building4 3 blocks4 3 for4 3 achieving4 3 financial4 3 success4 3 include4 3 a4 3 fo
undation4 3 of43regular4 3 income4 3 that4 3 provides4 3 the4 3 means4 3 to4 3 support4 3 your4 3 li
festyle4 3 and4 3 save4 3 for4 3 desired43goals4 3 in4 3 the4 3 future.4 3 The4 3 foundation4 3 suppo
rts4 3 a4 3 base4 3 of4 3 various4 3 banking4 3 accounts,
insurance4 3 protection,4 3 and4 3 employee4 3 benefits.4 3 Then4 3 we4 3 can4 3 establish4 3 goals,4
3 a4 3 recordkeeping43system,4 3 a4 3 budget,4 3 and4 3 an4 3 emergency4 3 savings4 3 fund.4 3 We4
3 will4 3 also4 3 manage4 3 various4 3 expenses43such4 3 as4 3 housing,4 3 transportation,4 3 insuranc
e,4 3 and4 3 the4 3 payment4 3 of4 3 taxes.4 3 We4 3 will4 3 also4 3 need4 3 to43handle4 3 credit,4 3 savi
ngs,4 3 and4 3 educational4 3 costs.4 3 Finally,4 3 we4 3 invest4 3 in4 3 various4 3 investment43alternat
ives4 3 such4 3 as4 3 mutual4 3 funds,4 3 stocks,4 3 and4 3 bonds,4 3 often4 3 for4 3 retirement.4 3 As
4 3 a4 3 result4 3 of43all4 3 these4 3 building4 3 blocks,4 3 we4 3 are4 3 more4 3 apt4 3 to4 3 have4 3 a4
ii
Personal Finance, 14th Edition
ii ii ii
By E. Thomas Garman, Chapter 1 - 17
ii ii ii ii ii ii ii
,TABLE OF CONTENTS
43 43
Part43I:43 FINANCIAL43PLANNING.
1. Understanding43Personal43Finance.
2. Career43 Planning.
3. Financial43Statements,43Goals,43and43Budge
ts.43Part43II:43MONEY43MANAGEMENT.
4. Managing43Income43Taxes.
5. Managing43Checking43and43Savings43Accounts.
6. Building43and43Maintaining43Good43Credit.
7. Credit43Cards43 and43Consumer43Loans.
8. Vehicles43and43Other43 Major43Purchases.
9. Obtaining43Affordable43Housing.
Part43III:43INCOME43 AND43 ASSET43PROTECTION.
10. Managing43Property43and43Liability43Risk.
11. Planning43for43Health43 Care43 Expenses.
12. Life43Insurance43Plannin
g.43Part43IV:43INVESTMENTS.
13. Investment43Fundamentals.
,14. Investing43in43Stocks43 and43 Bonds.
15. Mutual43and43Exchange-Traded43Funds.
16. Real43 Estate43and43High-Risk43 Investments.
17. Retirement43and43Estate43Planning.
SolutionandAnswerGuide
GARMAN/FOX,4 3 PERSONAL FINANCE 14E,4 3 CHAPTER 1:4 3 THINKING LIKE A4 3 4 3 FINANCIAL
PLANNER
TABLE43 OF43CONTENTS
43
Answers4 3 to4 3 Chapter4 3 Concept4 3 Checks ............................................................................... 2
What4 3 Do4 3 You4 3 Recommend4 3 Now? .................................................................................... 4
Let’s4 3 Talk4 3 About4 3 It ................................................................................................................. 5
Do4 3 the4 3 Math ............................................................................................................................. 6
Financial43 Planning4 3 Cases .......................................................................................................... 8
Extended4 3 Learning.................................................................................................................... 10
, ANSWERS43TO43CHAPTER43CONCEPT43CHECKS
LO1.14 3 Recognize4 3 the4 3 keys4 3 to4 3 achieving4 3 financial4 3 success.
1. Explain43 the4 3 five4 3 steps4 3 in4 3 the4 3 financial4 3 planning4 3 process.
Answer:4 3 There4 3 are4 3 five4 3 fundamental4 3 steps4 3 to4 3 the4 3 personal4 3 financial4 3 planni
ng4 3 process:4 3 (1)43evaluate4 3 your4 3 financial4 3 health4 3 to4 3 your4 3 education4 3 and4 3 caree
r4 3 choice;4 3 (2)4 3 define4 3 your4 3 financial43goals;4 3 (3)4 3 develop4 3 a4 3 plan4 3 of4 3 action4 3 t
o4 3 achieve4 3 your4 3 goals;4 3 (4)4 3 implement4 3 spending4 3 and43saving4 3 plans4 3 to4 3 monit
or4 3 and4 3 control4 3 progress4 3 toward4 3 your4 3 goals;4 3 and4 3 (5)4 3 review4 3 your43financial
4 3 progress4 3 and4 3 make4 3 changes4 3 as4 3 appropriate.
2. Distinguish43among43financial4 3 success,43financial43security,4 3 and43financial43happ
iness.43Answer:4 3 Financial4 3 success4 3 is4 3 the4 3 achievement4 3 of4 3 financial4 3 aspirati
ons4 3 that4 3 are4 3 desired,
planned,4 3 or4 3 attempted.4 3 Success4 3 is4 3 defined4 3 by4 3 the4 3 individual4 3 or4 3 family4 3 that4 3 see
ks4 3 it.4 3 Financial
success4 3 may4 3 be4 3 defined4 3 as4 3 being4 3 able4 3 to4 3 live4 3 according4 3 to4 3 one’s4 3 sta
ndard4 3 of4 3 living.43Financial4 3 security4 3 is4 3 that4 3 comfortable4 3 feeling4 3 that4 3 your
4 3 financial4 3 resources4 3 will4 3 be43adequate4 3 to4 3 fulfill4 3 any4 3 needs4 3 you4 3 have4 3 as
4 3 well4 3 as4 3 your4 3 wants.4 3 Financial4 3 happiness4 3 is4 3 the43experience4 3 you4 3 have4 3
when4 3 you4 3 are4 3 satisfied4 3 with4 3 money4 3 matters.4 3 People4 3 who4 3 are4 3 happy43abo
ut4 3 their4 3 finances4 3 will4 3 see4 3 a4 3 spillover4 3 into4 3 positive4 3 feelings4 3 about4 3 life4 3 i
n4 3 general.
3. Summarize4 3 what4 3 you4 3 will4 3 accomplish4 3 studying4 3 personal4 3 finance.
Answer:4 3 Several4 3 things4 3 can4 3 be4 3 accomplished4 3 by4 3 studying4 3 personal4 3 finance.4 3 R
ecognize4 3 how4 3 to43manage4 3 unexpected4 3 and4 3 expected4 3 financial4 3 events.4 3 Pay4 3 as4 3
little4 3 as4 3 possible4 3 in4 3 income4 3 taxes.43Understand4 3 how4 3 to4 3 effectively43comparison4 3
shop4 3 for4 3 vehicles4 3 and4 3 homes.4 3 Protect4 3 what4 3 we4 3 own.43Invest4 3 wisely.4 3 Accumulat
e4 3 and4 3 protect4 3 the4 3 wealth4 3 that4 3 we4 3 may4 3 choose4 3 to4 3 spend4 3 during4 3 our43non-
working4 3 years43(e.g.,43retirement)43or43donate.
4. What4 3 are4 3 the4 3 building4 3 blocks4 3 to4 3 achieving4 3 financial4 3 success?
Answer:4 3 The4 3 building4 3 blocks4 3 for4 3 achieving4 3 financial4 3 success4 3 include4 3 a4 3 fo
undation4 3 of43regular4 3 income4 3 that4 3 provides4 3 the4 3 means4 3 to4 3 support4 3 your4 3 li
festyle4 3 and4 3 save4 3 for4 3 desired43goals4 3 in4 3 the4 3 future.4 3 The4 3 foundation4 3 suppo
rts4 3 a4 3 base4 3 of4 3 various4 3 banking4 3 accounts,
insurance4 3 protection,4 3 and4 3 employee4 3 benefits.4 3 Then4 3 we4 3 can4 3 establish4 3 goals,4
3 a4 3 recordkeeping43system,4 3 a4 3 budget,4 3 and4 3 an4 3 emergency4 3 savings4 3 fund.4 3 We4
3 will4 3 also4 3 manage4 3 various4 3 expenses43such4 3 as4 3 housing,4 3 transportation,4 3 insuranc
e,4 3 and4 3 the4 3 payment4 3 of4 3 taxes.4 3 We4 3 will4 3 also4 3 need4 3 to43handle4 3 credit,4 3 savi
ngs,4 3 and4 3 educational4 3 costs.4 3 Finally,4 3 we4 3 invest4 3 in4 3 various4 3 investment43alternat
ives4 3 such4 3 as4 3 mutual4 3 funds,4 3 stocks,4 3 and4 3 bonds,4 3 often4 3 for4 3 retirement.4 3 As
4 3 a4 3 result4 3 of43all4 3 these4 3 building4 3 blocks,4 3 we4 3 are4 3 more4 3 apt4 3 to4 3 have4 3 a4
