Ricardo wants a career where he can help people. He also wants to travel and see the world. He is thinking about becoming a personal care aide. What advice would you give him?
> To what types of cash flows is the time value of money concept most commonly applied?
> Your childhood friend, Brad Brooks, has asked you to help him gain control of his personal finances. Single and 30 years old, Brad is employed as a salesperson for a technology company. His annual salary is $48,000. He claims no exemptions (he enjoys the
> Recall that Dave and Sharon Sampson established a plan to save $300 per month (or $3,600 per year) for their children’s education. Their oldest child is six years old and will begin college in 12 years. They will invest the $300 in a sa
> Recall that Dave and Sharon Sampson established a plan to save $300 per month (or $3,600 per year) for their children’s education. Their oldest child is six years old and will begin college in 12 years. They will invest the $300 in a sa
> Recall that Dave and Sharon Sampson established a plan to save $300 per month (or $3,600 per year) for their children’s education. Their oldest child is six years old and will begin college in 12 years. They will invest the $300 in a savings account that
> What is the primary objective of investing? What else must be considered? What potential investment vehicles are available?
> Recall that Dave and Sharon Sampson established a plan to save $300 per month (or $3,600 per year) for their children’s education. Their oldest child is six years old and will begin college in 12 years. They will invest the $300 in a savings account that
> DeMarcus wants to retire with $1 million in savings by the time he turns 60. He is currently 18 years old. How much will he need to save each year, assuming he can get a 12% annual return on his investments?
> Emily and Paul are married and filed a joint return for 2015. The standard deduction for their filing status is $12,600. They have the following itemized deductions: Medical bills above the 10% limit……….$400 Mortgage interest…………………………….3,500 State inco
> How much will you have in 36 months if you invest $75 a month at 10% annual interest?
> Luis wants to know how much he will have available to spend on his trip to Belize in three years if he deposits $3,000 today at an annual interest rate of 9%.
> Sandra wants to deposit $100 each year for her son. If she places it in a savings account that pays 5% per year, what amount will be in the account in 20 years?
> What is the time value of money? How is it related to opportunity costs?
> Kyle has $1,000 in cash received for high school graduation gifts from various relatives. He wants to invest it in a certificate of deposit (CD) so that he will have a down payment on a car when he graduates from college in five years. His bank will pay
> Elizabeth borrowed $1,000 from her credit union. She has to make only one payment at the end of the loan. How much will she owe at the end of the year if the credit union charges her 5% interest?
> Jim accepted a $3,000 loan from his Uncle Kurt. Uncle Kurt agreed to defer payments for two years until after Jim graduates from college. How much will Jim owe in two years if his uncle charges him 6% interest compounded annually?
> Why do most people need access to financing at some point in their life?
> Winston will receive $100,000 on his 25th birthday. Which time value of money concept would you use to compute the value of his future inheritance?
> Jen spends $10 per week on lottery tickets. If she takes the same amount that she spends on lottery tickets and invests it each week for the next five years at 10%, compounded weekly, how much will she have in five years?
> Jerry would like to save the same amount every month until he turns 40. Which time value concept should he use to compute the value of his savings at that time?
> Lakesha recently found out that her credit card balance was compounded daily rather than monthly. How will this compounding frequency impact the outstanding debt she owes on her credit card?
> In determining the future value of an annuity to be invested monthly over a five-year period, what number of periods should you use?
> Describe some instances when determining the present value of an amount is useful.
> Twins Jessica and Joshua, both 25, graduated from college and began working in the family restaurant business. The first year, Jessica began putting $2,000 per year in an individual retirement account and contributed to it for a total of 10 years. After
> Cindy and Jack have always practiced good financial habits, in particular, developing and living by a budget. They are currently in the market to purchase a new car and have budgeted $300 per month for car payments. While visiting a local dealership, a
> Kirk can take his $1,000 income tax refund and invest it in a 36-month certificate of deposit at 7%, compounded monthly, or he can use the money to purchase a home entertainment system and put $30 a month in a bank savings account that will pay him 7% an
> The Sampsons realize that the first step toward achieving their financial goals is to create a budget capturing their monthly cash inflows and outflows. Dave and Sharon’s combined income is now about $4,000 per month after taxes. With the new cash inflo
> Define personal financial planning. What types of decisions are involved in a personal financial plan?
> The Sampsons realize that the first step toward achieving their financial goals is to create a budget capturing their monthly cash inflows and outflows. Dave and Sharon’s combined income is now about $4,000 per month after taxes. With t
> The Sampsons realize that the first step toward achieving their financial goals is to create a budget capturing their monthly cash inflows and outflows. Dave and Sharon’s combined income is now about $4,000 per month after taxes. With the new cash inflow
> Jesse has just learned that she won $1 million in her state lottery. She has the choice of receiving a lump-sum payment of $312,950 or $50,000 per year for the next 20 years. Jesse can invest the lump sum at 8%, or she can invest the annual payments at 6
> The Sampsons realize that the first step toward achieving their financial goals is to create a budget capturing their monthly cash inflows and outflows. Dave and Sharon’s combined income is now about $4,000 per month after taxes. With t
> From the information in Problems 1 through 3, how much can Angela expect to save in the next 12 months? Data from Problem 1: Angela earns $2,170 per month before taxes in her full-time job and $900 before taxes in her part-time job. About $650 per mont
> Angela makes a budget based on her personal cash flow statement. In two months, she must pay $375 for tags and taxes on her car. How will this payment affect her net cash flow for that month? Suggest ways that Angela might handle this situation.
> Stuart is in the 25% tax bracket. Recently, he sold stock that he had held longer than a year for a gain of $20,000. How much tax will Stuart pay on this gain?
> Angela (from problem 1) inspects her checkbook and her credit card bills and determines that she has the following monthly expenses: Rent………..……………….….$500 Internet……………………………30 Electricity………………………..100 Water…..……………………………25 Cellular….…….…………………….40 Gr
> Angela earns $2,170 per month before taxes in her full-time job and $900 before taxes in her part-time job. About $650 per month is needed to pay taxes. What is Angela’s disposable income? Why is it important to track disposable income?
> Jarrod is a college student. All of Jarrod’s disposable income is used to pay his college-related expenses. Although he has no liabilities (Jarrod is on a scholarship), he does have a credit card that he typically uses for emergencies. He and his friend
> Matt is self-employed as a carpenter. He made $42,000 after expenses in 2015. How much did he contribute to FICA taxes?
> If Angela is saving $350 per month, what is her savings rate (i.e., savings as a percentage of disposable income)?
> Angela analyzes her personal budget and decides that she can reduce her recreational spending by $50 per month. How much will that increase her annual savings? What will her annual savings be now?
> What is a personal balance sheet?
> ABC Stacey would like to have $1 million available to her at retirement. Her investments have an average annual return of 11%. If she makes contributions of $300 per month, will she reach her goal when she retires in 30 years?
> How do you think people who do not create a budget may deal with cash deficiencies? How can this affect their personal relationships?
> Suppose you want to change your budget to increase your savings. What could you do?
> Describe the process of creating an annual budget.
> List your monthly cash outflows. Will everyone have similar cash outflows?
> What are the six key components of a financial plan?
> Identify some factors that affect cash inflows.
> Define cash inflows and cash outflows and identify some sources of each. How are net cash flows determined?
> What two personal financial statements are most important to personal financial planning?
> What are two factors that impact your cash inflows?
> Heather purchased a new car for $18,000 three years ago and listed the new car as an asset with a value of $18,000 on her personal balance sheet. She was able to borrow the entire $18,000 to purchase the car and listed the car loan as a liability with a
> Lena has just become eligible to participate in her company’s retirement plan. Her company does not match contributions, but the plan does average an annual return of 12%. Lena is 40 and plans to work to age 65. If she contributes $200 per month, how muc
> Justin’s stock portfolio increased in value during the year, and the balance on his mortgage declined. What happened to his net worth over the course of the year?
> What three financial characteristics can be monitored by analyzing your personal balance sheet?
> How does a personal balance sheet help you track your net worth?
> What are liabilities? Define current liabilities and long-term liabilities.
> Describe two ways real estate might provide a return on an investment.
> How does your choice of career impact your financial plan?
> Stephen is in a 15% marginal tax bracket. In 2015, he sold stock that he had held for nine months for a gain of $1,900. How much tax must he pay on this capital gain? How much would the tax be if he had held the stock for 13 months?
> How are unexpected expenses and liquidity related?
> How do you assess the accuracy of your budget? How can finding forecasting errors improve your budget?
> What is a budget? What is the purpose of a budget? How can a budget help when you are anticipating cash shortages or a cash surplus?
> Jeremey wants to increase his net worth. What advice would you give him?
> Jason’s car was just stolen, and the police informed him that they will probably be unable to recover it. His insurance will not cover the theft. Jason has a net worth of $3,000, all of which is easily convertible to cash. Jason requires a car for his jo
> Explain how credit card usage can impact your spending habits.
> Explain in logical terms why a weak economy can cause the net worth of individuals to decline.
> Explain in logical terms why values of assets such as homes and stocks may decline during a weak economy.
> What is the liquidity ratio? What does it indicate? How is the debt-to-asset ratio calculated? What does a high debt ratio indicate? How is your savings rate determined? What does it indicate?
> Michelle is attending college and has a part-time job. Once she finishes college, Michelle would like to relocate to a metropolitan area. She wants to build her savings so that she will have a “nest egg” to start her off. Michelle works out her budget an
> When does your net worth increase? Will the purchase of additional assets always increase your net worth? Why or why not?
> What are bonds? What are stocks? What are mutual funds? Describe how each of these provides a return on your investment.
> How can an understanding of personal finance benefit you?
> Using the information in problem 10, if Nick and Nora’s itemized deductions increase by $2,000, how will their taxable income be affected?
> Name three classifications of assets. Briefly define and give examples of each.
> Explain why it is important to select the right university or college.
> Nick and Nora are married and have three children in college. They have an adjusted gross income of $47,400. If their standard deduction is $12,600, itemized deductions are $14,200, and they get an exemption of $4,000 for each adult and each dependent, w
> How can peer pressure impact your spending habits?
> Margo is in the 39.6% marginal tax bracket. What is her tax liability on dividend income of $6,000?
> During a weak economy jobs are scarce, so some individuals may consider starting their own businesses. What is the disadvantage of this idea during a weak economy?
> Using the information in problem 14, if Tracy’s standard deduction is $6,300 and her exemption is $4,000, what is her taxable income?
> Assume that you have established a plan to achieve a particular level of wealth in three years, but the economic conditions suddenly cause both your existing income and the value of your existing assets to decline. Should you leave your financial plan as
> What is an opportunity cost? What might be some of the opportunity costs of spending $10 each week on the lottery?
> If Daniel (from problem 12) had forgotten a $1,000 tax credit (instead of a $1,000 tax deduction), how would his taxes be affected?
> Winners of the Georgia Lotto drawing are given the choice of receiving the winning amount divided equally over 20 years or as a lump-sum cash option amount. The cash option amount is determined by discounting the winning amount at 7% over 20 years. This
> Dave and Sharon Sampson are 30 years old and have two children, who are five and six years old. Since marrying seven years ago, the Sampsons have relied on Dave’s salary, which is currently $48,000 per year. They have not be
> List some information available on the Internet that might be useful for financial planning. Describe one way you might use some of this information for financial planning purposes.
> Daniel has a marginal tax rate of 25%. He suddenly realizes that he neglected to include a $1,000 tax deduction. How will this oversight affect his taxes?
> Why might you need to revise your financial plan?
> The IRS tax code allows for the deduction of expenses incurred in traveling to a job interview. Sean, Erica, and their two children have used this deduction to fund their vacations for the last eight years. Each year, several months prior to their vacati
> Once your financial plan has been implemented, what is the next step? Why is it important?
> Jauna made $178,400 in salary during 2015. How much were her FICA withholdings for that year?
> Jill has decided to save 50% of her income for retirement. Her father told her she needed to set a different goal. Why do you think he gave her this advice?
> Dawn’s adjusted gross income is $16,700. Dawn has $1,800 in unreimbursed medical expenses. How much can Dawn claim as an itemized deduction?
> Name some factors that might affect your current financial position.
> Brian makes $27,000 per year. How much can he expect to contribute to FICA taxes in 2015? How much will his employer contribute?
> Julia (from problem 1) is considering trading in her car for a new one. Her new car payment will be $325 per month, and her insurance cost will increase by $60 per month. Julia determines that her other car-related expenses (gas, oil) will stay about the
> Juan would like to give his newly born grandson a gift of $10,000 on his 18th birthday. Juan can earn 7% annual interest on a certificate of deposit. How much must he deposit now to achieve his goal?
> Emma’s adjusted gross income is $24,200. She has $1,800 in unreimbursed medical expenses. How much in medical expenses can Emma claim as an itemized deduction?
