SOLUTION MANUAL
Personal Finance, 14th Edition
By E. Thomas Garman, Chapter 1-17
,TABLE OF CONTENTS Q Q Q
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 Q Q Q
GARMAN/FOX,Q PERSONALQ FINANCEQ 14E,Q CHAPTERQ 1:Q THINKINGQ LIKEQ AQ FINANCIALQ PLANNER
TABLE OF CONTENTS
Q Q
AnswersQtoQChapterQConceptQChecks ................................................................................................. 2
WhatQDoQYouQRecommendQNow? ........................................................................................................ 4
Let’sQTalkQAboutQIt ...................................................................................................................................... 5
DoQtheQMath........................................................................................................................................... 6
FinancialQPlanningQCases ...................................................................................................................... 8
ExtendedQLearning ............................................................................................................................... 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
Q Q Q Q
LO1.1QRecognizeQtheQkeysQtoQachievingQfinancialQsuccess.
1. ExplainQtheQfiveQstepsQinQtheQfinancialQplanningQprocess.
Answer:QThereQareQfiveQfundamentalQstepsQtoQtheQpersonalQfinancialQplanningQprocess:Q(1)QevaluateQy
ourQfinancialQhealthQtoQyourQeducationQandQcareerQchoice;Q(2)QdefineQyourQfinancialQgoals;Q(3)QdevelopQ
aQplanQofQactionQtoQachieveQyourQgoals;Q(4)QimplementQspendingQandQsavingQplansQtoQmonitorQandQco
ntrolQprogressQtowardQyourQgoals;QandQ(5)QreviewQyourQfinancialQprogressQandQmakeQchangesQasQappr
opriate.
2. DistinguishQamongQfinancialQsuccess,QfinancialQsecurity,QandQfinancialQhappiness.
Answer:QFinancialQsuccessQisQtheQachievementQofQfinancialQaspirationsQthatQareQdesired,Qplanned,Qor
Qattempted.QSuccessQisQdefinedQbyQtheQindividualQorQfamilyQthatQseeksQit.QFinancialQsuccessQmayQbeQd
efinedQasQbeingQableQtoQliveQaccordingQtoQone’sQstandardQofQliving.QFinancialQsecurityQisQthatQcomfort
ableQfeelingQthatQyourQfinancialQresourcesQwillQbeQadequateQtoQfulfillQanyQneedsQyouQhaveQasQwellQasQ
yourQwants.QFinancialQhappinessQisQtheQexperienceQyouQhaveQwhenQyouQareQsatisfiedQwithQmoneyQma
tters.QPeopleQwhoQareQhappyQaboutQtheirQfinancesQwillQseeQaQspilloverQintoQpositiveQfeelingsQaboutQlife
QinQgeneral.
3. SummarizeQwhatQyouQwillQaccomplishQstudyingQpersonalQfinance.
Answer:QSeveralQthingsQcanQbeQaccomplishedQbyQstudyingQpersonalQfinance.QRecognizeQhowQtoQmanageQ
unexpectedQandQexpectedQfinancialQevents.QPayQasQlittleQasQpossibleQinQincomeQtaxes.QUnderstandQhowQ
toQeffectivelyQcomparisonQshopQforQvehiclesQandQhomes.QProtectQwhatQweQown.QInvestQwisely.QAccumula
teQandQprotectQtheQwealthQthatQweQmayQchooseQtoQspendQduringQourQnon-
workingQyearsQ(e.g.,Qretirement)QorQdonate.
4. WhatQareQtheQbuildingQblocksQtoQachievingQfinancialQsuccess?
Answer:QTheQbuildingQblocksQforQachievingQfinancialQsuccessQincludeQaQfoundationQofQregularQincomeQ
thatQprovidesQtheQmeansQtoQsupportQyourQlifestyleQandQsaveQforQdesiredQgoalsQinQtheQfuture.QTheQfoun
dationQsupportsQaQbaseQofQvariousQbankingQaccounts,QinsuranceQprotection,QandQemployeeQbenefits.QT
henQweQcanQestablishQgoals,QaQrecordkeepingQsystem,QaQbudget,QandQanQemergencyQsavingsQfund.QWe
QwillQalsoQmanageQvariousQexpensesQsuchQasQhousing,Qtransportation,Qinsurance,QandQtheQpaymentQofQ
taxes.QWeQwillQalsoQneedQtoQhandleQcredit,Qsavings,QandQeducationalQcosts.QFinally,QweQinvestQinQvario
usQinvestmentQalternativesQsuchQasQmutualQfunds,Qstocks,QandQbonds,QoftenQforQretirement.QAsQaQresu
ltQofQallQtheseQbuildingQblocks,QweQareQmoreQaptQtoQhaveQaQfinanciallyQsuccessfulQlife.
LO1.2QUnderstandQhowQtheQeconomyQaffectsQyourQpersonalQfinancialQsuccess.
1. SummarizeQtheQphasesQofQtheQbusinessQcycle.
Answer:QTheQbusinessQcycleQentailsQaQwavelikeQpatternQofQrisingQandQfallingQeconomicQactivityQasQme
asuredQbyQeconomicQindicatorsQlikeQunemploymentQratesQorQtheQgrossQdomesticQproduct.QTheQphasesQ
ofQtheQbusinessQcycleQincludeQexpansionQ(preferredQstage—
productionQisQhigh,QunemploymentQlow,QinterestQratesQlowQorQfalling,QstockQmarketQandQconsumerQde
mandQhigh),Qpeak,Qcontraction,Qdownturn,Qtrough,QandQrecovery.
2. DescribeQtwoQstatisticsQthatQhelpQpredictQtheQfutureQdirectionQofQtheQeconomy.
Answer:QForecastingQtheQstateQofQtheQeconomyQinvolvesQpredicting,Qestimating,QorQcalculatingQwhatQw
