Contrast the interests of young people and seniors.
> A cash-basis taxpayer includes income from a service business when a. The services are performed. b. The client is invoiced for the services. c. The client’s check is deposited in the bank. d. The client’s check is received.
> A client provides a current balance sheet to the financial planner during the initial data gathering phase of the financial planning process. This financial statement will enable the financial planner to gain an understanding of all of the following exce
> Why is integration so important in financial planning?
> Describe some similarities and differences between a financial planning practitioner and a physician.
> Contrast a segmented and a comprehensive financial plan.
> Describe the personal financial planning process and relate it to planning procedures.
> Explain the terms PV and FV.
> Helen, a sociologist, is considering buying a new power lawn mower. It would save her 30 minutes of work a week, which she would use to see another client. Her fee is $16 per hour and she works 50 weeks a year. The lawn mower would cost $1,400. What woul
> Why does personal financial planning involve other disciplines as shown in Figure 1.3? Give some practical examples of their use. Figure 1.3: FINANCE TOOLS OTHER DISCIPLINES AND TOOLS Micro and macroeconomics - Time value of money - Cash flow analy
> Why did it take until the 1970s for the field of financial planning to begin?
> Explain withdrawal risk.
> Why is it advisable to have a significant amount of a retirement portfolio invested in equity?
> How does investing for retirement differ from investing after retirement? Why?
> What are the similarities and differences between retirement needs and insurance?
> Why should a family have umbrella insurance?
> Identify and briefly explain the principal types of social insurance.
> Why is an own occupation definition for disability so valuable?
> Contrast an HMO and a PPO.
> Laurence was presented with a capital expenditure for a furnace that would cost $12,000 today and would generate the following savings. Year ………………..Amount 1 ……………………………$2,000 2 ……………………………$3,000 3 …………………………….$2,000 4 ……………………………$4,000 5 ……………………………$5,
> Define adverse selection and give an example of it.
> What is longevity risk and explain the two different scenarios that exist?
> Identify the three parts of an insurance policy?
> What is indexed universal life insurance and how is it different from the other whole life policies?
> How does portfolio management enter into the risk management process?
> Name three strengths and weaknesses of whole life and term insurance.
> Julian was considering whole life and term insurance for his 20-year need. Which one should he select?
> Why can term insurance be deducted from whole life to determine the return on the whole life policy?
> Describe the insurance needs approach.
> List the types of risks to human assets and briefly explain how to reduce them.
> Louis had the following cash flow items: Cash flow from operations ………………………$40,000 Interest payments ………………………………………6,000 Total interest and debt payments …………………9,000 If Louis is in the 30 percent tax bracket, how many times are fixed payments earned
> What are the significant factors in selecting an insurance company?
> How can insurance modify portfolio risk?
> What are the weaknesses of mutual funds?
> In what cause would you to suggest direct ownership over private partnership? Why?
> Compare and contrast the value in owning a home versus investing in real estate investment trusts (REITs).
> Why is a home a good inflation hedge? Should a home be included as an asset if its occupants aren’t sure they could sell it? Explain.
> Why is the home often a better investment than renting? Under what circumstances would renting be preferred?
> What are the significant characteristics of a mortgage?
> Contrast life cycle human-asset valuations for skilled and unskilled workers.
> What are the strengths and weaknesses of the net present value (NPV) and internal rate of return (IRR) methods?
> Smith invests in a limited partnership that requires an outlay of $9,200 today. At the end of years 1 through 5, he will receive the after-tax cash flows shown below. The partnership will be liquidated at the end of the fifth year. Smith is in the 28 per
> Why should capital expenditures be treated separately on a cash flow statement?
> Briefly explain total portfolio management (TPM).
> Discuss the advantages and disadvantages of leasing a car.
> What factors should you consider when you aren’t sure whether to buy or lease a car?
> Describe the three approaches to decision making for capital expenditures.
> Contrast the strengths and weaknesses of a fixed-rate mortgage with those of a variable-rate mortgage.
> List and explain the borrowing factors.
> Why is operating leverage as it pertains to risk important?
> What is the difference between debt and fixed obligations?
> Investment A costs $10,000,000 and offers a single cash inflow of $13,000,000 after one year. Investment B costs $1,000,000 and will be worth $2,000,000 at the end of the year. The appropriate discount rate or required rate of return is 10 percent compou
> Richard e-mailed me that he and Monica differed about the impact of his extra spending over the past 15 years. He calculated it at about $3,000 a year. He said the total cost of $45,000 was well within his capability to make up. Monica said the cost was
> How would you interact and advise a client with goals you personally find outlandish but that the client values greatly. Creating a mock dialogue could be helpful.
> What would you consider to be the financial equivalent of Maslow’s hierarchy of needs? What are the basics? What comes last?
> What is the difference between feeling sympathy and empathy for the client? Is one more valuable than the other? Why?
> Which types of data should be gathered at an initial interview and which should be left for future meetings?
> What are two pieces of data that are needed in each of the six financial planning areas?
> In calculating the ratio times fixed payments earned, after-tax interest payments are added back in the denominator. Why?
> What is the difference between debt and fixed obligations?
> Jeremy is in financial difficulty. He owes $5,000 and cannot pay it back now. Should he declare bankruptcy? Why? What do you think he should do?
> What are some attractive interviewing techniques?
> What are some of the broad financial goals of people with whom you will come in contact?
> This case allows students to develop solutions themselves. It begins with an extensive background that will assist in the decisions that are asked for in subsequent chapters. BACKGROUND—FIRST INTERVIEW Brad and Barbara arranged to come in to see me. The
> How can financial planning goals be broken down into minimum, satisfactory, and higher-level components according to parts of the financial plan?
> Credit cards are a grossly inefficient way to borrow money. True or false? Explain and discuss their advantages.
> Why is preplanning for an interview important?
> How should resistance to a question or recommended course of action be handled?
> Alexis wants to buy a large home relative to her income and thinks that she may not qualify for a mortgage for 80 percent of the price. She expects interest rates to rise and anticipates staying in the home for many years. Explain the strengths and weakn
> Contrast the views of finance and accounting on recording operating results.
> Outline some expenses of a pro forma statement that cannot use inflation to project their growth and indicate what rate should be used.
> Is an increase in debt a plus or minus from a cash flow standpoint? Explain.
> Why segregate a balance sheet by type of asset and type of liability?
> Elaborate on the two approaches to making projections for a cash flow statement.
> In working out the capital needs analysis, it became apparent that there was need for an additional $17,000 of savings annually over what was previously calculated. The first reason had to do with a recent job development that resulted in a projected mod
> What are reasons that a person may have a poor net cash flow yet be considered to be in good financial health?
> In your opinion, which presents results more fairly, finance or accounting? Explain.
> What makes the household an enterprise?
> Define the term opportunity cost of time.
> What does life cycle theory say a household should have in savings at the end of its life? Is that practical? Explain your answer.
> List some of the advantages and disadvantages of various organizational structures for the individual.
> What is TPM and why is it valuable in the framework of household planning?
> When would it be beneficial for the household enterprise to outsource some activities, for example, cooking?
> Are any of the outlays in preferable to the others? Support your answer.
> What is the importance of the theory of financial planning?
> Richard came in with his cash flow statistics and very helpful notes on projections. His list included He said to assume that his salary will rise 6 percent a year, and his investment income is 11 percent a year (the investment loss came a year ago). H
> Outline the similarities and differences between a household and a business.
> Why is it important to differentiate among the various types of household expenditures?
> Describe household operations according to household finance.
> What is rate of return and why do we use inflation-adjusted return?
> Explain regular annuity versus annuity due and give examples.
> How does household finance tie into financial planning?
> Do you believe Maria needed a financial planner? Why or why not?
> Do you think the amount of information available on the Internet regarding advice for financial planning is beneficial or detrimental to the financial planning career? Support your answer with information from the chapter.
> What is a contributing factor for the increasing demand for financial planners?
> Would a lump sum today or the comparable amount in periodic payments deposited over time provide a higher FV? Why?
> Monica asked that we meet to see if I could help to reduce the differences between them. When the time came, she started the conversation by saying that Richard wasn’t saving any money at all. They hadn’t started implementing. She said he spent a good de
> Why is knowledge of the time value of money useful?
> What is compounding, and why is it important?
> Sam went to a financial planner who proceeded to give him written recommendations in all areas of financial planning. Is that a financial plan? If not, what might be missing?
> List and discuss the parts of a financial plan.
