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
72 72
Part72I:72 FINANCIAL72PLANNING.
1. Understanding72Personal72Finance.
2. Career72 Planning.
3. Financial72Statements,72Goals,72and72Budge
ts.72Part72II:72MONEY72MANAGEMENT.
4. Managing72Income72Taxes.
5. Managing72Checking72and72Savings72Accounts.
6. Building72and72Maintaining72Good72Credit.
7. Credit72Cards72 and72Consumer72Loans.
8. Vehicles72and72Other72 Major72Purchases.
9. Obtaining72Affordable72Housing.
Part72III:72INCOME72 AND72 ASSET72PROTECTION.
10. Managing72Property72and72Liability72Risk.
11. Planning72for72Health72 Care72 Expenses.
12. Life72Insurance72Plannin
g.72Part72IV:72INVESTMENTS.
13. Investment72Fundamentals.
,14. Investing72in72Stocks72 and72 Bonds.
15. Mutual72and72Exchange-Traded72Funds.
16. Real72 Estate72and72High-Risk72 Investments.
17. Retirement72and72Estate72Planning.
SolutionandAnswerGuide
GARMAN/FOX,7 2 PERSONAL FINANCE 14E,7 2 CHAPTER 1:7 2 THINKING LIKE A7 2 7 2 FINANCIAL
PLANNER
TABLE72 OF72CONTENTS
72
Answers7 2 to7 2 Chapter7 2 Concept7 2 Checks ............................................................................... 2
What7 2 Do7 2 You7 2 Recommend7 2 Now? .................................................................................... 4
Let’s7 2 Talk7 2 About7 2 It ................................................................................................................. 5
Do7 2 the7 2 Math ............................................................................................................................. 6
Financial72 Planning7 2 Cases .......................................................................................................... 8
Extended7 2 Learning.................................................................................................................... 10
, ANSWERS72TO72CHAPTER72CONCEPT72CHECKS
LO1.17 2 Recognize7 2 the7 2 keys7 2 to7 2 achieving7 2 financial7 2 success.
1. Explain72 the7 2 five7 2 steps7 2 in7 2 the7 2 financial7 2 planning7 2 process.
Answer:7 2 There7 2 are7 2 five7 2 fundamental7 2 steps7 2 to7 2 the7 2 personal7 2 financial7 2 planni
ng7 2 process:7 2 (1)72evaluate7 2 your7 2 financial7 2 health7 2 to7 2 your7 2 education7 2 and7 2 caree
r7 2 choice;7 2 (2)7 2 define7 2 your7 2 financial72goals;7 2 (3)7 2 develop7 2 a7 2 plan7 2 of7 2 action7 2 t
o7 2 achieve7 2 your7 2 goals;7 2 (4)7 2 implement7 2 spending7 2 and72saving7 2 plans7 2 to7 2 monit
or7 2 and7 2 control7 2 progress7 2 toward7 2 your7 2 goals;7 2 and7 2 (5)7 2 review7 2 your72financial
7 2 progress7 2 and7 2 make7 2 changes7 2 as7 2 appropriate.
2. Distinguish72among72financial7 2 success,72financial72security,7 2 and72financial72happ
iness.72Answer:7 2 Financial7 2 success7 2 is7 2 the7 2 achievement7 2 of7 2 financial7 2 aspirati
ons7 2 that7 2 are7 2 desired,
planned,7 2 or7 2 attempted.7 2 Success7 2 is7 2 defined7 2 by7 2 the7 2 individual7 2 or7 2 family7 2 that7 2 see
ks7 2 it.7 2 Financial
success7 2 may7 2 be7 2 defined7 2 as7 2 being7 2 able7 2 to7 2 live7 2 according7 2 to7 2 one’s7 2 sta
ndard7 2 of7 2 living.72Financial7 2 security7 2 is7 2 that7 2 comfortable7 2 feeling7 2 that7 2 your
7 2 financial7 2 resources7 2 will7 2 be72adequate7 2 to7 2 fulfill7 2 any7 2 needs7 2 you7 2 have7 2 as
7 2 well7 2 as7 2 your7 2 wants.7 2 Financial7 2 happiness7 2 is7 2 the72experience7 2 you7 2 have7 2
when7 2 you7 2 are7 2 satisfied7 2 with7 2 money7 2 matters.7 2 People7 2 who7 2 are7 2 happy72abo
ut7 2 their7 2 finances7 2 will7 2 see7 2 a7 2 spillover7 2 into7 2 positive7 2 feelings7 2 about7 2 life7 2 i
n7 2 general.
3. Summarize7 2 what7 2 you7 2 will7 2 accomplish7 2 studying7 2 personal7 2 finance.
Answer:7 2 Several7 2 things7 2 can7 2 be7 2 accomplished7 2 by7 2 studying7 2 personal7 2 finance.7 2 R
ecognize7 2 how7 2 to72manage7 2 unexpected7 2 and7 2 expected7 2 financial7 2 events.7 2 Pay7 2 as7 2
little7 2 as7 2 possible7 2 in7 2 income7 2 taxes.72Understand7 2 how7 2 to7 2 effectively72comparison7 2
shop7 2 for7 2 vehicles7 2 and7 2 homes.7 2 Protect7 2 what7 2 we7 2 own.72Invest7 2 wisely.7 2 Accumulat
e7 2 and7 2 protect7 2 the7 2 wealth7 2 that7 2 we7 2 may7 2 choose7 2 to7 2 spend7 2 during7 2 our72non-
working7 2 years72(e.g.,72retirement)72or72donate.
4. What7 2 are7 2 the7 2 building7 2 blocks7 2 to7 2 achieving7 2 financial7 2 success?
Answer:7 2 The7 2 building7 2 blocks7 2 for7 2 achieving7 2 financial7 2 success7 2 include7 2 a7 2 fo
undation7 2 of72regular7 2 income7 2 that7 2 provides7 2 the7 2 means7 2 to7 2 support7 2 your7 2 li
festyle7 2 and7 2 save7 2 for7 2 desired72goals7 2 in7 2 the7 2 future.7 2 The7 2 foundation7 2 suppo
rts7 2 a7 2 base7 2 of7 2 various7 2 banking7 2 accounts,
insurance7 2 protection,7 2 and7 2 employee7 2 benefits.7 2 Then7 2 we7 2 can7 2 establish7 2 goals,7
2 a7 2 recordkeeping72system,7 2 a7 2 budget,7 2 and7 2 an7 2 emergency7 2 savings7 2 fund.7 2 We7
2 will7 2 also7 2 manage7 2 various7 2 expenses72such7 2 as7 2 housing,7 2 transportation,7 2 insuranc
e,7 2 and7 2 the7 2 payment7 2 of7 2 taxes.7 2 We7 2 will7 2 also7 2 need7 2 to72handle7 2 credit,7 2 savi
ngs,7 2 and7 2 educational7 2 costs.7 2 Finally,7 2 we7 2 invest7 2 in7 2 various7 2 investment72alternat
ives7 2 such7 2 as7 2 mutual7 2 funds,7 2 stocks,7 2 and7 2 bonds,7 2 often7 2 for7 2 retirement.7 2 As
7 2 a7 2 result7 2 of72all7 2 these7 2 building7 2 blocks,7 2 we7 2 are7 2 more7 2 apt7 2 to7 2 have7 2 a7
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
72 72
Part72I:72 FINANCIAL72PLANNING.
1. Understanding72Personal72Finance.
2. Career72 Planning.
3. Financial72Statements,72Goals,72and72Budge
ts.72Part72II:72MONEY72MANAGEMENT.
4. Managing72Income72Taxes.
5. Managing72Checking72and72Savings72Accounts.
6. Building72and72Maintaining72Good72Credit.
7. Credit72Cards72 and72Consumer72Loans.
8. Vehicles72and72Other72 Major72Purchases.
9. Obtaining72Affordable72Housing.
Part72III:72INCOME72 AND72 ASSET72PROTECTION.
10. Managing72Property72and72Liability72Risk.
11. Planning72for72Health72 Care72 Expenses.
12. Life72Insurance72Plannin
g.72Part72IV:72INVESTMENTS.
13. Investment72Fundamentals.
,14. Investing72in72Stocks72 and72 Bonds.
15. Mutual72and72Exchange-Traded72Funds.
16. Real72 Estate72and72High-Risk72 Investments.
17. Retirement72and72Estate72Planning.
SolutionandAnswerGuide
GARMAN/FOX,7 2 PERSONAL FINANCE 14E,7 2 CHAPTER 1:7 2 THINKING LIKE A7 2 7 2 FINANCIAL
PLANNER
TABLE72 OF72CONTENTS
72
Answers7 2 to7 2 Chapter7 2 Concept7 2 Checks ............................................................................... 2
What7 2 Do7 2 You7 2 Recommend7 2 Now? .................................................................................... 4
Let’s7 2 Talk7 2 About7 2 It ................................................................................................................. 5
Do7 2 the7 2 Math ............................................................................................................................. 6
Financial72 Planning7 2 Cases .......................................................................................................... 8
Extended7 2 Learning.................................................................................................................... 10
, ANSWERS72TO72CHAPTER72CONCEPT72CHECKS
LO1.17 2 Recognize7 2 the7 2 keys7 2 to7 2 achieving7 2 financial7 2 success.
1. Explain72 the7 2 five7 2 steps7 2 in7 2 the7 2 financial7 2 planning7 2 process.
Answer:7 2 There7 2 are7 2 five7 2 fundamental7 2 steps7 2 to7 2 the7 2 personal7 2 financial7 2 planni
ng7 2 process:7 2 (1)72evaluate7 2 your7 2 financial7 2 health7 2 to7 2 your7 2 education7 2 and7 2 caree
r7 2 choice;7 2 (2)7 2 define7 2 your7 2 financial72goals;7 2 (3)7 2 develop7 2 a7 2 plan7 2 of7 2 action7 2 t
o7 2 achieve7 2 your7 2 goals;7 2 (4)7 2 implement7 2 spending7 2 and72saving7 2 plans7 2 to7 2 monit
or7 2 and7 2 control7 2 progress7 2 toward7 2 your7 2 goals;7 2 and7 2 (5)7 2 review7 2 your72financial
7 2 progress7 2 and7 2 make7 2 changes7 2 as7 2 appropriate.
2. Distinguish72among72financial7 2 success,72financial72security,7 2 and72financial72happ
iness.72Answer:7 2 Financial7 2 success7 2 is7 2 the7 2 achievement7 2 of7 2 financial7 2 aspirati
ons7 2 that7 2 are7 2 desired,
planned,7 2 or7 2 attempted.7 2 Success7 2 is7 2 defined7 2 by7 2 the7 2 individual7 2 or7 2 family7 2 that7 2 see
ks7 2 it.7 2 Financial
success7 2 may7 2 be7 2 defined7 2 as7 2 being7 2 able7 2 to7 2 live7 2 according7 2 to7 2 one’s7 2 sta
ndard7 2 of7 2 living.72Financial7 2 security7 2 is7 2 that7 2 comfortable7 2 feeling7 2 that7 2 your
7 2 financial7 2 resources7 2 will7 2 be72adequate7 2 to7 2 fulfill7 2 any7 2 needs7 2 you7 2 have7 2 as
7 2 well7 2 as7 2 your7 2 wants.7 2 Financial7 2 happiness7 2 is7 2 the72experience7 2 you7 2 have7 2
when7 2 you7 2 are7 2 satisfied7 2 with7 2 money7 2 matters.7 2 People7 2 who7 2 are7 2 happy72abo
ut7 2 their7 2 finances7 2 will7 2 see7 2 a7 2 spillover7 2 into7 2 positive7 2 feelings7 2 about7 2 life7 2 i
n7 2 general.
3. Summarize7 2 what7 2 you7 2 will7 2 accomplish7 2 studying7 2 personal7 2 finance.
Answer:7 2 Several7 2 things7 2 can7 2 be7 2 accomplished7 2 by7 2 studying7 2 personal7 2 finance.7 2 R
ecognize7 2 how7 2 to72manage7 2 unexpected7 2 and7 2 expected7 2 financial7 2 events.7 2 Pay7 2 as7 2
little7 2 as7 2 possible7 2 in7 2 income7 2 taxes.72Understand7 2 how7 2 to7 2 effectively72comparison7 2
shop7 2 for7 2 vehicles7 2 and7 2 homes.7 2 Protect7 2 what7 2 we7 2 own.72Invest7 2 wisely.7 2 Accumulat
e7 2 and7 2 protect7 2 the7 2 wealth7 2 that7 2 we7 2 may7 2 choose7 2 to7 2 spend7 2 during7 2 our72non-
working7 2 years72(e.g.,72retirement)72or72donate.
4. What7 2 are7 2 the7 2 building7 2 blocks7 2 to7 2 achieving7 2 financial7 2 success?
Answer:7 2 The7 2 building7 2 blocks7 2 for7 2 achieving7 2 financial7 2 success7 2 include7 2 a7 2 fo
undation7 2 of72regular7 2 income7 2 that7 2 provides7 2 the7 2 means7 2 to7 2 support7 2 your7 2 li
festyle7 2 and7 2 save7 2 for7 2 desired72goals7 2 in7 2 the7 2 future.7 2 The7 2 foundation7 2 suppo
rts7 2 a7 2 base7 2 of7 2 various7 2 banking7 2 accounts,
insurance7 2 protection,7 2 and7 2 employee7 2 benefits.7 2 Then7 2 we7 2 can7 2 establish7 2 goals,7
2 a7 2 recordkeeping72system,7 2 a7 2 budget,7 2 and7 2 an7 2 emergency7 2 savings7 2 fund.7 2 We7
2 will7 2 also7 2 manage7 2 various7 2 expenses72such7 2 as7 2 housing,7 2 transportation,7 2 insuranc
e,7 2 and7 2 the7 2 payment7 2 of7 2 taxes.7 2 We7 2 will7 2 also7 2 need7 2 to72handle7 2 credit,7 2 savi
ngs,7 2 and7 2 educational7 2 costs.7 2 Finally,7 2 we7 2 invest7 2 in7 2 various7 2 investment72alternat
ives7 2 such7 2 as7 2 mutual7 2 funds,7 2 stocks,7 2 and7 2 bonds,7 2 often7 2 for7 2 retirement.7 2 As
7 2 a7 2 result7 2 of72all7 2 these7 2 building7 2 blocks,7 2 we7 2 are7 2 more7 2 apt7 2 to7 2 have7 2 a7
