Jessica Wright has always been interested in stocks. She has decided to invest $2,000 once every year into an equity mutual fund that is expected to produce a return of 6 percent a year for the foreseeable future. Jessica is really curious how much money she can reasonably expect her investment to be worth in 20 years. What would you tell her?
> Wyatt Collins recently graduated from college and is evaluating two credit cards. Card A has an annual fee of $75 and an interest rate of 9 percent. Card B has no annual fee and an interest rate of 16 percent. Assuming that Wyatt intends to carry no bala
> Ryan Gray, a student at State College, has a balance of $380 on his retail charge card; if the store levies a finance charge of 21 percent per year, how much monthly interest will be added to his account?
> Sean and Amy Anderson have a home with an appraised value of $180,000 and a mortgage balance of only $90,000. Given that an S&L is willing to lend money at a loan-to-value ratio of 75 percent, how big a home equity credit line can Sean and Amy obtain? Ho
> What are the main features and implications of the Credit Card Act of 2009?
> What is the purpose of a tax audit? Describe some things you can do to be prepared if your return is audited.
> Use Worksheet 6.1. Alyssa Clark is evaluating her debt safety ratio. Her monthly take- home pay is $3,320. Each month, she pays $380 for an auto loan, $120 on a personal line of credit, $60 on a department store charge card, and $85 on her bank credit ca
> Isaac Wright has a monthly take-home pay of $1,685; he makes payments of $410 a month on his outstanding consumer credit (excluding the mortgage on his home). How would you characterize Isaac’s debt burden? What if his take-home pay were $850 a month and
> Carter Hall recently graduated from college and wants to borrow $50,000 to start a business, which he believes will produce a cash flow of at least $10,000 per year. As a student, Carter was active in clubs, held many leadership positions, and did a lot
> Christine Lin was reviewing her credit card statement and noticed several charges that didn’t look familiar to her. Christine is unsure whether she should pay the bill in full and forget about the unfamiliar charges, or “make some noise.” If some of thes
> Henry Stewart is trying to decide whether to apply for a credit card or a debit card. He has $8,500 in a savings account at the bank and spends his money frugally. What advice would you have for Henry? Describe the benefits and drawbacks of each type of
> Parker Young recently received his monthly MasterCard bill for the period June 1–30, 2015, and wants to verify the monthly finance charge calculation, which is assessed at a rate of 15 percent per year and based on ADBs, including new purchases. His outs
> Martina Lopez has several credit cards, on which she is carrying a total current balance of $14,500. She is considering transferring this balance to a new card issued by a local bank. The bank advertises that, for a 2 percent fee, she can transfer her ba
> Establish a credit history. After graduating from college last fall, Nicole butler took a job as a consumer credit analyst at a local bank. From her work reviewing credit applications, she realizes that she should begin establishing her own credit histor
> Denise Green is currently renting an apartment for $725 per month and paying $275 annually for renter’s insurance. She just found a small townhouse that she can buy for $185,000. She has enough cash for a $10,000 down payment and $4,000
> How much might a home buyer expect to pay in closing costs on a $220,000 house with a 10 percent down payment? How much would the home buyer have to pay at the time of closing, taking into account closing costs, down payment, and a loan fee of 3 points?
> Define estimated taxes, and explain under what conditions such tax payments are required.
> Using the maximum ratios for a conventional mortgage, how big a monthly payment could the Danforth family afford if their gross (before-tax) monthly income amounted to $4,000? Would it make any difference if they were already making monthly installment l
> Calculating required down payment on home purchase. How much would you have to put down on a house costing $100,000 if the house had an appraised value of $105,000 and the lender required an 80 percent loan-to-value ratio?
> Use Worksheet 5.3. Selma and Rodney Jackson need to calculate the amount that they can afford to spend on their first home. They have a combined annual income of $47,500 and have $27,000 available for a down payment and closing costs. The Jacksons estima
> Art Patton has equally attractive job offers in Miami and Los Angeles. The rent ratios in the cities are 8 and 20, respectively. Art would really like to buy rather than rent a home after the moves. Explain how to interpret the rent ratio and what it tel
> Lease vs purchase car decision: Use Worksheet 5.1. Chris Svenson is trying to decide whether to lease or purchase a new car costing $18,000. If he leases, he’ll have to pay a $600 security deposit and monthly payments of $425 over the 36-month term of th
> Use Worksheet 5.4. Latha Yang purchased a condominium four years ago for $180,000, paying $1,250 per month on her $162,000, 8 percent, 25-year mortgage. The current loan balance is $152,401. Recently, interest rates have dropped sharply, causing Latha to
> What are the pros and cons of adding $100 a month to your fixed-rate mortgage payment?
> What would the monthly payments be on a $150,000 loan if the mortgage were set up as: a. A 15-year, 6 percent fixed-rate loan? b. A 30-year ARM in which the lender adds a margin of 2.5 to the index rate, which now stands at 4.5 percent? Find the monthly
> Find the monthly mortgage payments on the following mortgage loans using either your calculator or the table in Exhibit 5.8: a. $80,000 at 6.5 percent for 30 years b. $105,000 at 5.5 percent for 20 years c. $95,000 at 5 percent for 15 years Exhibit 5.8:
> Janet Wilhite has just graduated from college and needs to buy a car to commute to work. She estimates that she can afford to pay about $450 per month for a loan or lease and has about $2,000 in savings to use for a down payment. Develop a plan to guide
> Explain how the following are used in filing a tax return: (a) Form 1040, (b) various schedules that accompany Form 1040, and (c) tax rate schedules.
> Owen and Audrey Nelson together earn approximately $82,000 a year after taxes. Through an inheritance and some wise investing, they also have an investment portfolio with a value of almost $150,000. a. How much of their annual income do you recommend the
> Describe some of the short-term investment vehicles that can be used to manage your cash resources. What would you focus on if you were concerned that the financial crisis inflation will increase significantly in the future?
> If you put $6,000 in a savings account that pays interest at the rate of 4 percent, compounded annually, how much will you have in 5 years? .How much interest will you earn during the 5 years? If you put $6,000 each year into a savings account that pays
> Determine the annual net cost of these checking accounts: a. Monthly fee $4, check-processing fee of 20 cents, average of 23 checks written per month b. Annual interest of 2.5 percent paid if balance exceeds $750, $8 monthly fee if account falls below mi
> You’re getting married and are unhappy with your present bank. Discuss your strategy for choosing a new bank and opening an account. Consider the factors that are important to you in selecting a bank—such as the type and ownership of new accounts and ban
> Suppose that someone stole your ATM card and withdrew $950 from your checking account. How much money could you lose according to federal legislation if you reported the stolen card to the bank: (a) the day the card was stolen, (b) 6 days after the theft
> What type of bank serves your needs best? Visit the Web sites of the following institutions and prepare a chart comparing the services offered, such as traditional and online banking, investment services, and personal financial advice. Which one would yo
> Your parents are retired and have expressed concern about the really low interest rates they’re earning on their savings. They’ve been approached by an advisor who says he has a “sure-fire” way to get them higher returns. What would you tell your parents
> Shauna and Conan O’Farrell have been notified that they are being audited. What should they do to prepare for the audit?
> Steve and Beth Compton are married and have one child. Steve is putting together some figures so that he can prepare the Compton’s.0 joint 2014 tax return. He can claim three personal exemptions (including himself). So far, heâ
> What is a progressive tax structure and the economic rationale for it?
> Use Worksheets 3.1 and 3.2. Qiang Gao graduated from college in 2014 and began work as a systems analyst in July 2014. He is preparing to file his income tax return for 2014 and has collected the following financial information for calendar year 2014: T
> If Amy Phillips is single and in the 28 percent tax bracket, calculate the tax associated with each of the following transactions. (Use the IRS regulations for capital gains in effect in 2014.) a. She sold stock for $1,200 that she purchased for $1,000
> Debra Ferguson received the following items and amounts of income during 2014. Help her calculate (a) her gross income and (b) that portion (dollar amount) of her income that is tax exempt. Salary ……………………………………………….$33,500 Dividends …………………………………………….
> Prepare a record of your income and expenses for the last 30 days; then prepare a personal cash budget for the next three months. (Use the format in Worksheet 2.3, but fill out only three months and the Total column.) Use the cash budget to control and r
> Here is a portion of Chuck Schwartz’s budget record for April 2016. Fill in the blanks in columns 5 and 6. Note the answers are included. They may be deleted if you wish to use in classroom. Amount Item Budgeted Amount Spent (2) Be
> Richard and Elizabeth Walker are preparing their 2017 cash budget. Help the Walkers reconcile the following differences, giving reasons to support your answers. a. Their only source of income is Richard’s salary, which amounts to $5,000 a month before t
> Use Worksheet 2.2. Bill and Nancy Ballinger are about to construct their income and expense statement for the year ending December 31, 2016. They have put together the following income and expense information for 2016: Using the information provided, p
> Use Worksheet 2.1. Denise Fisher’s banker has asked her to submit a personal balance sheet as of June 30, 2016, in support of an application for a $6,000 home improvement loan. She comes to you for help in preparing it. So far, she has
> Put yourself 10 years into the future. Construct a fairly detailed and realistic balance sheet and income and expense statement reflecting what you would like to achieve by that time.
> Chad Livingston is preparing his balance sheet and income and expense statement for the year ending June 30, 2016. He is having difficulty classifying six items and asks for your help. Which, if any, of the following transactions are assets, liabilities,
> Saul Schwab’s, of Knoxville, Tennessee, was 65 when he retired in 2010. Camille, his wife of 40 years, passed away the next year. Her will left everything to Saul. Although Camille’s estate was valued at $2,250,000, th
> Dan Weaver wants to set up a fund to pay for his daughter’s education. In order to pay her expenses, he will need $23,000 in four years, $24,300 in five years, $26,000 in six years, and $28,000 in seven years. If he can put money into a fund that pays 4
> Chris Jones wishes to have $800,000 in a retirement fund 20 years from now. He can create the retirement fund by making a single lump-sum deposit today. a. If he can earn 6 percent on his investments, how much must Chris deposit today to create the retir
> Over the past several years, Catherine Lee has been able to save regularly. As a result, she has $54,188 in savings and investments today. She wants to establish her own business in five years and feels she will need $100,000 to do so. a. If she can earn
> Use future or present value techniques to solve the following problems. a. Starting with $15,000, how much will you have in 10 years if you can earn 6 percent on your money? If you can earn only 4 percent? b. If you inherited $45,000 today and invested a
> Assume that you graduated from college with a major in marketing and took a job with a large consumer products company. After three years, you are laid off when the company downsizes. Describe the steps you’d take to “repackage” yourself for another fiel
> Alice Reynolds and Tricia Bostwick, both freshman and friends at a major university, are interested in going into a health sciences career. While they're not just interested in the money they can make, they do want to have a sense of the compensation in
> Summarize current and projected trends in the economy with regard to GDP growth, unemployment, and inflation. How should you use this information to make personal financial and career planning decisions?
> Ben Saunders and Ashley Tinsdale are planning to get married in six months. Both are 30 years old have been out of college for several years. Ben uses three credit cards and has a bank account balance of $7,500 while Ashely only uses one credit card and
> What is a standard of living? What factors affect the quality of life?
> In the late 1980s, Carsten Richter, from Germany, migrated to the United States, where he is now a citizen. A man of many talents and deep foresight, he has built a large fleet of oceangoing oil tankers during his stay in the United States. Now a wealthy
> Terry and Evelyn Becker are a married couple in their mid-20s. Terry has a good start as an electrical engineer and Evelyn works as a sales representative. Since their marriage four years ago, Terry and Evelyn have been living comfortably. Their income h
> Is it possible to have a cash deficit on an income and expense statement? If so, how?
> Explain what cash basis means in this statement: “An income and expense statement should be prepared on a cash basis.” How and where are credit purchases shown when statements are prepared on a cash basis?
> Explain two ways in which net worth could increase (or decrease) from one period to the next.
> When might you use future value? Present value? Give specific examples.
> What is compounding? Explain the rule of 72.
> Why is it important to use time value of money concepts in setting personal financial goals?
> Why is it important to analyze actual budget surpluses or deficits at the end of each month?
> The Gonzales family has prepared their annual cash budget for 2016. They have divided it into 12 monthly budgets. Although only 1 monthly budget balances, they have managed to balance the overall budget for the year. What remedies are available to the Go
> Describe the cash budget and its three parts. How does a budget deficit differ from a budget surplus?
> Describe some of the areas or items you would consider when evaluating your balance sheet and income and expense statement. Cite several ratios that could help in this effort.
> Maria Sepulveda is 57 years old and has been widowed for 13 years. Never remarried, she has worked full-time since her husband died 13 years ago—in addition to raising her two children, the youngest of whom is now finishing college. After being forced to
> What are the two types of personal financial statements? What is a budget, and how does it differ from personal financial statements? What role do these reports play in a financial plan?
> Discuss the need for career planning throughout the life cycle and its relationship to financial planning. What are some of your own personal career goals?
> All people who have equivalent formal education earn similar incomes.” Do you agree or disagree with this statement? Explain your position.
> What is inflation, and why should it be a concern in financial planning?
> What are the stages of an economic cycle? Explain their significance for your personal finances.
> Discuss the following statement: “The interactions among government, business, and consumers determine the environment in which personal financial plans must be made.”
> What is a professional financial planner? Does it make any difference whether the financial planner earns money from commissions made on products sold as opposed to the fees he or she charges?
> Discuss briefly how the following situations affect personal financial planning: a. Being part of a dual-income couple b. Major life changes, such as marriage or divorce c. Death of a spouse
> There’s no sense in worrying about retirement until you reach middle age.” Discuss this point of view.
> Describe employee benefit and tax planning. How do they fit into the financial planning framework?
> Linda Calloway and Meredith Perdue are neighbors in Charleston. Linda works as a software engineer for Progressive Apps Corporation, while Sherry works as an executive for Industrial Container Company. Both are married, have two children, and are well pa
> Chad Jackson’s investments over the past several years have not lived up to his full return expectations. He is not particularly concerned, however, because his return is only about 2 percentage points below his expectations. Do you have any advice for C
> Discuss the relationship of life-cycle considerations to personal financial planning. What are some factors to consider when revising financial plans to reflect changes in the life cycle?
> What types of financial planning concerns does a complete set of financial plans cover?
> Distinguish between long-term, intermediate, and short-term financial goals. Give examples of each.
> Explain why it is important to set realistically attainable financial goals. Select one of your personal financial goals and develop a brief financial plan for achieving it.
> Explain why financial plans must be psychologically as well as economically sound. What is the best way to resolve money disputes in a relationship?
> What is the role of money in setting financial goals? What is the relationship of money to utility?
> Discuss the various forms in which wealth can be accumulated.
> What is average propensity to consume? Is it possible for two people with very different incomes to have the same average propensity to consume? Why?
> Describe the balance sheet, its components, and how you would use it in personal financial planning. Differentiate between investments and real and personal property.
> Nichole Whiting is the director of a major charitable organization in Charlotte, North Carolina. A single mother of one young child, she earns what could best be described as a modest income. Because charitable organizations aren’t known for their genero
> Define and differentiate between joint tenancy and tenancy by the entirety. Discuss the advantages and disadvantages of joint ownership. How does tenancy in common differ from joint tenancy?
> Describe briefly the importance of these documents in estate planning: (a) power of attorney, (b) living will, (c) durable power of attorney for health care, and (d) ethical will.
> What is meant by the probate process? Who is an executor, and what is the executor’s role in estate settlement?
> Explain these terms: (a) intestacy, (b) testator, (c) codicil, (d) letter of last instructions.
> How can changes in the provisions of a will be made legally? In what four ways can a will be revoked?
> Describe the basic clauses normally included in a will and the requirements regarding who may make a valid will.
> What is a will? Why is it important? Describe the consequences of dying intestate.
