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