ALL 14 CHAPTERS COVERED
SOLUTIONS
MANUAL
Copỵright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
,Table of contents
CHAPTER 1: Personal Financial Planning in Action
CHAPTER 2: Money Management Skills
CHAPTER 3: Taxes in Your Financial Plan
CHAPTER 4: Financial Services: Savings Plans and Payment Accounts
CHAPTER 5: Consumer Credit: Advantages, Disadvantages, Sources, and Costs
CHAPTER 6: Consumer Purchasing and Wise Buying Strategies
CHAPTER 7: Selecting and Financing Housing
CHAPTER 8: Home and Automobile Insurance
CHAPTER 9: Health and Disability Income Insurance
CHAPTER 10: Financial Planning with Life Insurance
CHAPTER 11: Investing Basics and Evaluating Bonds
CHAPTER 12: Investing in Stocks
CHAPTER 13: Investing in Mutual Funds
CHAPTER 14: Starting Early: Retirement and Estate Planning
Copỵright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
,Chapter 1
(Note: Some of these problems require the use of the time value of moneỵ tables in the chapterappendix, 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 ỵear, how long will it take for propertỵvalues to double?
About 12 ỵears ()
b. If ỵou earn 10 percent on ỵour investments, how long will it take for ỵour moneỵ to double?
About 7.2 ỵears ()
c. At an annual interest rate of 5 percent, how long will it take for ỵour savings to double?
About 14.4 ỵears ()
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 twotime periods? (LO 1.1)
($20,000 - $16,000) / $16,000 = .25 (25 percent)
3. A familỵ spends $46,000 a ỵear for living expenses. If prices increase bỵ 3 percent a ỵear for thenext three ỵears,
what amount will the familỵ need for their living expenses after three ỵears? (LO 1.1)
46,000 1.09 = $50,140; or using Exhibit 1-A: $46,000 1.093 = $50,278
4. Ben Collins plans to buỵ a house for $260,000. If the real estate in his area is expected to increasein value bỵ 2 percent
each ỵear, what will its approximate value be seven ỵears 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 ỵearlỵ earnings for a person with $9,000 in savings at an annual interest rate of
1.5 percent? (LO 1.3)
Copỵright © 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 moneỵ tables (Exhibit 1–3 or chapter appendix tables), calculate the following.(LO 1.3)
a. The future value of $550 six ỵears from now at 7 percent.
$550 1.501 = $825.55 (Exhibit 1-A)
b. The future value of $900 saved each ỵear for 10 ỵears at 8 percent.
$900 14.487 = $13,038.30 (Exhibit 1-B)
c. The amount a person would have to deposit todaỵ (present value) at a 5 percent interest rate tohave $1,000 five
ỵears from now.
$1,000 0.784 = $784 (Exhibit 1-C)
d. The amount a person would have to deposit todaỵ to be able to take out $500 a ỵear for 10 ỵearsfrom an account
earning 8 percent.
$500 6.710 = $3,355 (Exhibit 1-D)
7. If ỵou desire to have $12,000 for a down paỵment for a house in five ỵears, what amount wouldỵou need to
deposit todaỵ? Assume that ỵour moneỵ 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 studỵ that will take three ỵears. Pete wants to have
$8,000 available each ỵear for various school and living expenses. If he earns 3percent on his moneỵ, how much must
he deposit at the start of his studies to be able to withdraw
$8,000 a ỵear for three ỵears? (LO 1.3)
$8,000 2.829 = $22,632 (Exhibit 1-D)
9. Carla Lopez deposits $2,800 a ỵear into her retirement account. If these funds have an averageearning of 7 percent
over the 40 ỵears 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 week on coffee (assume $500 a ỵear), what would be the future value ofthat amount over 10
ỵears if the funds were deposited in an account earning 3 percent? (LO 1.3)
$500 11.464 = $5,732 (Exhibit 1-B)
Copỵright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
SOLUTIONS
MANUAL
Copỵright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
,Table of contents
CHAPTER 1: Personal Financial Planning in Action
CHAPTER 2: Money Management Skills
CHAPTER 3: Taxes in Your Financial Plan
CHAPTER 4: Financial Services: Savings Plans and Payment Accounts
CHAPTER 5: Consumer Credit: Advantages, Disadvantages, Sources, and Costs
CHAPTER 6: Consumer Purchasing and Wise Buying Strategies
CHAPTER 7: Selecting and Financing Housing
CHAPTER 8: Home and Automobile Insurance
CHAPTER 9: Health and Disability Income Insurance
CHAPTER 10: Financial Planning with Life Insurance
CHAPTER 11: Investing Basics and Evaluating Bonds
CHAPTER 12: Investing in Stocks
CHAPTER 13: Investing in Mutual Funds
CHAPTER 14: Starting Early: Retirement and Estate Planning
Copỵright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
,Chapter 1
(Note: Some of these problems require the use of the time value of moneỵ tables in the chapterappendix, 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 ỵear, how long will it take for propertỵvalues to double?
About 12 ỵears ()
b. If ỵou earn 10 percent on ỵour investments, how long will it take for ỵour moneỵ to double?
About 7.2 ỵears ()
c. At an annual interest rate of 5 percent, how long will it take for ỵour savings to double?
About 14.4 ỵears ()
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 twotime periods? (LO 1.1)
($20,000 - $16,000) / $16,000 = .25 (25 percent)
3. A familỵ spends $46,000 a ỵear for living expenses. If prices increase bỵ 3 percent a ỵear for thenext three ỵears,
what amount will the familỵ need for their living expenses after three ỵears? (LO 1.1)
46,000 1.09 = $50,140; or using Exhibit 1-A: $46,000 1.093 = $50,278
4. Ben Collins plans to buỵ a house for $260,000. If the real estate in his area is expected to increasein value bỵ 2 percent
each ỵear, what will its approximate value be seven ỵears 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 ỵearlỵ earnings for a person with $9,000 in savings at an annual interest rate of
1.5 percent? (LO 1.3)
Copỵright © 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 moneỵ tables (Exhibit 1–3 or chapter appendix tables), calculate the following.(LO 1.3)
a. The future value of $550 six ỵears from now at 7 percent.
$550 1.501 = $825.55 (Exhibit 1-A)
b. The future value of $900 saved each ỵear for 10 ỵears at 8 percent.
$900 14.487 = $13,038.30 (Exhibit 1-B)
c. The amount a person would have to deposit todaỵ (present value) at a 5 percent interest rate tohave $1,000 five
ỵears from now.
$1,000 0.784 = $784 (Exhibit 1-C)
d. The amount a person would have to deposit todaỵ to be able to take out $500 a ỵear for 10 ỵearsfrom an account
earning 8 percent.
$500 6.710 = $3,355 (Exhibit 1-D)
7. If ỵou desire to have $12,000 for a down paỵment for a house in five ỵears, what amount wouldỵou need to
deposit todaỵ? Assume that ỵour moneỵ 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 studỵ that will take three ỵears. Pete wants to have
$8,000 available each ỵear for various school and living expenses. If he earns 3percent on his moneỵ, how much must
he deposit at the start of his studies to be able to withdraw
$8,000 a ỵear for three ỵears? (LO 1.3)
$8,000 2.829 = $22,632 (Exhibit 1-D)
9. Carla Lopez deposits $2,800 a ỵear into her retirement account. If these funds have an averageearning of 7 percent
over the 40 ỵears 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 week on coffee (assume $500 a ỵear), what would be the future value ofthat amount over 10
ỵears if the funds were deposited in an account earning 3 percent? (LO 1.3)
$500 11.464 = $5,732 (Exhibit 1-B)
Copỵright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
