Question: What are the main features and implications

> An investor in the 28 percent tax bracket is trying to decide which of two bonds to select: one is a 5.5 percent U.S. Treasury bond selling at par; the other is a municipal bond with a 4.25 percent coupon, which is also selling at par. Which of these two

> Ranking investments by expected returns. What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. a. Buy a stock for $30 a share, hold it for thr

> Assume that an investor short-sells 500 shares of stock at a price of $85 a share, making a 50 percent margin deposit. A year later, she repurchases the borrowed shares at $50 a share. a. How much of her own money did the short-seller have to put up to m

> Given that Hometown Care, Inc.’s stock is currently selling for $40 a share, calculate the amount of money that Calvin Haskins will make (or lose) on each of the following transactions. Assume that all transactions involve 100 shares of stock, and ignore

> Which of the following would offer the best return on investment? Assume that you buy $5,000 in stock in all three cases, and ignore interest and transaction costs in all your calculations. a. Buy a stock at $60 without margin, and sell it a year later a

> Claire Gerber wants to buy 300 shares of Google, which is currently selling in the market for $537.34 a share. Rather than liquidate all her savings, she decides to borrow through her broker. Assume that the margin requirement on common stock is 50 perce

> Distinguish between gross earnings and take-home pay. What does the employer do with the difference?

> Suppose Gary Hooker places an order to buy 100 shares of The Gap. Explain how the order will be processed if it’s a market order. Would it make any difference if it had been a limit order? Explain.

> Listed below are three pairs of stocks. Look at each pair and select the security you’d like to own, given that you want to select the one that’s worth more money. Then, after making all three of your selections, use The Wall Street Journal or some other

> Assume that the following quote for The Walt Disney Company, a NYSE stock, appeared on May 1, 2015 (Friday) on Yahoo! Finance (http://finance.yahoo.com/q?s=DIS&ql=1): Given this information, answer the following questions. a. At what price did the stock

> Use Worksheet 11.2 to help Clayton and Julie Grover, a married couple in their early 40s, evaluate their securities portfolio, which includes these holdings. a. IBM. (NYSE; symbol IBM): 100 shares bought in 2011 for $170.40 per share. b. Verizon (NYSE; s

> Using the S&P report in Exhibit 11.6, find the following information for Apple. a. What was the amount of revenues (i.e., sales) generated by the company in 2014? b. What were the latest annual dividends per share and dividend yield? c. What were the ear

> Why do you suppose that large, well-known companies such as Apple, Starbucks, and Facebook prefer to have their shares traded on the NASDAQ rather than on one of the major listed exchanges, such as the NYSE (for which they’d easily meet all listing requi

> Use Worksheet 11.1 Alison Conroy is a young career woman who’s now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, what she would really like to do

> Jose Ruiz is a single 40-year-old loan officer at large regional bank; he has a 16-year-old son. He has decided to use his annual bonus as a down payment on a new car. One Saturday afternoon in late September, he visits Unique Motors and buys a new car f

> Marc Rose has a PAP with coverage of $25,000/$50,000 for bodily injury liability, $25,000 for property damage liability, $5,000 for medical payments, and a $500 deductible for collision insurance. How much will his insurance cover in each of the followin

> Tyler and Sherry Hughes, both graduate students, moved into an apartment near the university. Sherry wants to buy renter’s insurance, but Fred thinks that they don’t need it because their furniture isn’t worth much. Sherry a points out that, among other

> Briefly define the five filing categories available to taxpayers. When might married taxpayers choose to file separately?

> Last year, Brett and Amber Walsh bought a home with a dwelling replacement value of $250,000 and insured it (via an HO-5 policy) for $210,000. The policy reimburses for actual cash value and has a $500 deductible, standard limits for coverage C items, an

> Assume that Tina Walsh had a homeowner’s insurance policy with $100,000 of coverage on the dwelling. Would a 90 percent co-insurance clause be better than an 80 percent clause in such a policy? Give reasons to support your answer.

> Assess your current health insurance situation. Do you have any health insurance now? What does your policy cover? What is excluded? Are there any gaps that you think need to be filled? Are there any risks in your current lifestyle or situation that migh

> Ben West, a 35-year-old computer programmer, earns $72,000 a year. His monthly take-home pay is $3,750. His wife, Ashley, works part-time at their children’s elementary school but receives no benefits. Under state law, Ashleyâ&#12

> Discuss the pros and cons of long-term-care insurance. Does it make sense for anyone in your family right now? Why or why not? What factors might change this assessment in the future?

> Use Worksheet 9.1. Erika Willis, a recent college graduate, has decided to accept a job offer from a nonprofit organization. She’ll earn $34,000 a year but will receive no employee health benefits. Erika estimates that her monthly livin

> John Chang was seriously injured in a snowboarding accident that broke both his legs and an arm. His medical expenses included five days of hospitalization at $900 a day, $6,200 in surgical fees, $4,300 in physician’s fees (including time in the hospital

> Joe and Whitney Alexander have two children, with ages of 6 years and 5 months. Their younger child, Nathan, was born with a congenital heart defect that will require several major surgeries in the next few years to correct fully. Joe is employed as a sa

> While at lunch with a group of coworkers, one of your friends mentions that he plans to buy a variable life insurance policy because it provides a good annual return and is a good way to build savings for his 5-year-old’s college education. Another colle

> Ramona and Pablo Valdez are a dual-career couple who just had their first child. Pablo age 29, already has a group life insurance policy, but Ramona’s employer does not offer life insurance. A financial planner is recommending that the 25-year-old Ramona

> Explain each of the following strategies for reducing current taxes: (a) maximizing deductions, (b) income shifting, (c) tax-free income, and (d) tax-deferred income.

> Using the premium schedules provided in Exhibits 8.2, 8.3, and 8.5, how much in annual premiums would a 25-year-old male have to pay for $100,000 of annual renewable term, level premium term, and whole life insurance? (Assume a five-year term or period o

> Use Worksheet 8.1. Rudy Steele, 43, is a recently divorced father of two children, ages 9 and 7. He currently earns $95,000 a year as an operations manager for a utility company. The divorce settlement requires him to pay $1,500 a month in child support

> Katie Holt is a 72-year-old widow who has recently been diagnosed with Alzheimer’s disease. She has limited financial assets of her own and has been living with her daughter Laurie for two years. Her only income is $850 a month in Socia

> Assuming that interest is the only finance charge, how much interest would be paid on a $5,000 installment loan to be repaid in 36 monthly installments of $166.10? What is the APR on this loan?

> Todd Kowalski is borrowing $10,000 for five years at 7 percent. Payments are made on a monthly basis, which are determined using the add-on method. a. How much total interest will Chris pay on the loan if it is held for the full five-year term? b. What

> Chris Jenkins needs to borrow $4,000. First State Bank will lend her the money for 12 months through a single-payment loan at 8 percent, discount; Home Savings and Loan will make her a $4,000, single-payment, 12-month loan at 10 percent, simple interest.

> Find the finance charges on a 6.5 percent, 18-month, single-payment loan when interest is computed using the simple interest method. Find the finance charges on the same loan when interest is computed using the discount method. Determine the APR in each

> Using the simple interest method, find the monthly payments on a $3,000 installment loan if the funds are borrowed for 24 months at an annual interest rate of 6 percent. How much interest will be paid during the first year of this loan?

> Every six months, Larry Sun takes an inventory of the consumer debts that he has outstanding. His latest tally shows that he still owes $4,000 on a home improvement loan (monthly payments of $125); he is making $85 monthly payments on a personal loan wit

> Assume that you’ve been shopping for a new car and intend to finance part of it through an installment loan. The car you’re looking for has a sticker price of $18,000. The local dealership has offered to sell it to you for $3,000 down and finance the bal

> What types of assistance and tax preparation services does the IRS provide?

> Because of a job change, Ben Hardesty has just relocated to the southeastern United States. He sold his furniture before he moved, so he’s now shopping for new furnishings. At a local furniture store, he’s found an assortment of couches, chairs, tables,

> Use Worksheet 7.2. Elizabeth Erlich wants to buy a home entertainment center. Complete with a big-screen TV, DVD, and sound system, the unit would cost $4,500. Elizabeth has over $15,000 in a money fund, so she can easily afford to pay cash for the whole

> Sherman Jacobs plans to borrow $5,000 and to repay it in 36 monthly installments. This loan is being made at an annual add-on interest rate of 7.5 percent. a. Calculate the finance charge on this loan, assuming that the only component of the finance cha

> Lina Martinez wants to buy a new high-end audio system for her car. The system is being sold by two dealers in town, both of whom sell the equipment for the same price of $2,000. Lina can buy the equipment from Dealer A, with no money down, by making pay

> After careful comparison shopping, Bill Withers decides to buy a new Toyota Camry. With some options added, the car has a price of $23,558—including plates and taxes. Because he can’t afford to pay cash for the car, he will use some savings and his old c

> Marilyn Seacrest is a sophomore at State College and is running out of money. Wanting to continue her education, Marilyn is considering a student loan. Explain her options. How can she minimize her borrowing costs and maximize her flexibility?

> 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 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&#1

> 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

> 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

> 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