SOLUTION MANUAL
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Personal Finance, 14th Edition
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By E. Thomas Garman, Chapter 1 - 17
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,TABLE OF CONTENTS d d d
Part I: FINANCIAL PLANNING.
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1. Understanding Personal Finance.
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2. Career Planning.
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3. Financial Statements, Goals, and Budgets.
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Part II: MONEY MANAGEMENT.
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4. Managing Income Taxes.
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5. Managing Checking and Savings Accounts.
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6. Building and Maintaining Good Credit.
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7. Credit Cards and Consumer Loans.
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8. Vehicles and Other Major Purchases.
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9. Obtaining Affordable Housing.
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Part III: INCOME AND ASSET PROTECTION.
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10. Managing Property and Liability Risk.
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11. Planning for Health Care Expenses.
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12. Life Insurance Planning.
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Part IV: INVESTMENTS.
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13. Investment Fundamentals.
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14. Investing in Stocks and Bonds.
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15. Mutual and Exchange-Traded Funds.
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16. Real Estate and High-Risk Investments.
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17. Retirement and Estate Planning.
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,Solution and Answer Guide d d d
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL
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DPLANNER
TABLE OF CONTENTSD D
Answers dto dChapter dConcept dChecks ................................................................................................. 2
What dDo dYou dRecommend dNow? ....................................................................................................... 4
Let’s dTalk dAbout dIt .............................................................................................................................. 5
Do dthe dMath.......................................................................................................................................... 6
Financial dPlanning dCases ..................................................................................................................... 8
Extended dLearning.............................................................................................................................. 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
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LO1.1 dRecognize dthe dkeys dto dachieving dfinancial dsuccess.
1. Explain dthe dfive dsteps din dthe dfinancial dplanning dprocess.
Answer: dThere dare dfive dfundamental dsteps dto dthe dpersonal dfinancial dplanning dprocess: d(1) devaluate
dyour dfinancial dhealth dto dyour deducation dand dcareer dchoice; d(2) ddefine dyour dfinancial dgoals; d(3)
ddevelop da dplan dof daction dto dachieve dyour dgoals; d(4) dimplement dspending dand dsaving dplans dto
dmonitor dand dcontrol dprogress dtoward dyour dgoals; dand d(5) dreview dyour dfinancial dprogress dand dmake
dchanges das dappropriate.
2. Distinguish damong dfinancial dsuccess, dfinancial dsecurity, dand dfinancial dhappiness.
Answer: dFinancial dsuccess dis dthe dachievement dof dfinancial daspirations dthat dare ddesired, dplanned, dor
dattempted. dSuccess dis ddefined dby dthe dindividual dor dfamily dthat dseeks dit. dFinancial dsuccess dmay dbe
ddefined das dbeing dable dto dlive daccording dto done’s dstandard dof dliving. dFinancial dsecurity dis dthat
dcomfortable dfeeling dthat dyour dfinancial dresources dwill dbe dadequate dto dfulfill dany dneeds dyou dhave das
dwell das dyour dwants. dFinancial dhappiness dis dthe dexperience dyou dhave dwhen dyou dare dsatisfied dwith
dmoney dmatters. dPeople dwho dare dhappy dabout dtheir dfinances dwill dsee da dspillover dinto dpositive
dfeelings dabout dlife din dgeneral.
3. Summarize dwhat dyou dwill daccomplish dstudying dpersonal dfinance.
Answer: dSeveral dthings dcan dbe daccomplished dby dstudying dpersonal dfinance. dRecognize dhow dto
dmanage dunexpected dand dexpected dfinancial devents. dPay das dlittle das dpossible din dincome dtaxes.
dUnderstand dhow dto deffectively dcomparison dshop dfor dvehicles dand dhomes. dProtect dwhat dwe down. dInvest
dwisely. dAccumulate dand dprotect dthe dwealth dthat dwe dmay dchoose dto dspend dduring dour dnon-working
dyears d(e.g., dretirement) dor ddonate.
4. What dare dthe dbuilding dblocks dto dachieving dfinancial dsuccess?
Answer: dThe dbuilding dblocks dfor dachieving dfinancial dsuccess dinclude da dfoundation dof dregular
dincome dthat dprovides dthe dmeans dto dsupport dyour dlifestyle dand dsave dfor ddesired dgoals din dthe dfuture.
dThe dfoundation dsupports da dbase dof dvarious dbanking daccounts, dinsurance dprotection, dand demployee
dbenefits. dThen dwe dcan destablish dgoals, da drecordkeeping dsystem, da dbudget, dand dan demergency
dsavings dfund. dWe dwill dalso dmanage dvarious dexpenses dsuch das dhousing, dtransportation, dinsurance,
dand dthe dpayment dof dtaxes. dWe dwill dalso dneed dto dhandle dcredit, dsavings, dand deducational dcosts.
dFinally, dwe dinvest din dvarious dinvestment dalternatives dsuch das dmutual dfunds, dstocks, dand dbonds,
doften dfor dretirement. dAs da dresult dof dall dthese dbuilding dblocks, dwe dare dmore dapt dto dhave da
dfinancially dsuccessful dlife.
LO1.2 dUnderstand dhow dthe deconomy daffects dyour dpersonal dfinancial dsuccess.
1. Summarize dthe dphases dof dthe dbusiness dcycle.
Answer: dThe dbusiness dcycle dentails da dwavelike dpattern dof drising dand dfalling deconomic dactivity das
dmeasured dby deconomic dindicators dlike dunemployment drates dor dthe dgross ddomestic dproduct. dThe
dphases dof dthe dbusiness dcycle dinclude dexpansion d(preferred dstage—production dis dhigh, dunemployment
dlow, dinterest drates dlow dor dfalling, dstock dmarket dand dconsumer ddemand dhigh), dpeak, dcontraction,
ddownturn, dtrough, dand drecovery.
2. Describe dtwo dstatistics dthat dhelp dpredict dthe dfuture ddirection dof dthe deconomy.
Answer: dForecasting dthe dstate dof dthe deconomy dinvolves dpredicting, destimating, dor dcalculating dwhat
dwill dhappen din dadvance. dWe dneed dto dbe dable dto dforecast dthe dstate dof dthe deconomy, dinflation, dand
