Focus on Personal Finance
7th Edition by Jack R. Kapoor
Complete Chapter Solutions Manual
are included (Ch 1 to 14)
** Immediate Download
** Swift Response
** All Chapters included
,Problems Chapter 1 - SOLUTIONS
(Note: Some of these problems require the use of the time value of money tables in the chapter
appendix, a financial calculator, or spreadsheet software.)
1. Using the rule of 72, approximate the following amounts. (LO 1.1)
a. If the value of land in an area is increasing 6 percent a year, how long will it take for property
values to double?
About 12 years ()
b. If you earn 10 percent on your investments, how long will it take for your money to double?
About 7.2 years ()
c. At an annual interest rate of 5 percent, how long will it take for your savings to double?
About 14.4 years ()
2. In 2019, selected automobiles had an average cost of $16,000. The average cost of those same
automobiles is now $20,000. What was the rate of increase for these automobiles between the two
time periods? (LO 1.1)
($20,000 - $16,000) / $16,000 = .25 (25 percent)
3. A family spends $46,000 a year for living expenses. If prices increase by 3 percent a year for the
next three years, what amount will the family need for their living expenses after three years? (LO
1.1)
46,000 × 1.09 = $50,140; or using Exhibit 1-A: $46,000 × 1.093 = $50,278
4. Ben Collins plans to buy a house for $260,000. If the real estate in his area is expected to increase
in value by 2 percent each year, what will its approximate value be seven years from now? (LO 1.1)
$260,000 × 1.149 = $298,740; or using Exhibit 1-A: $260,000 × 1.149 = $298,740
5. What would be the yearly earnings for a person with $9,000 in savings at an annual interest rate of
1.5 percent? (LO 1.3)
$9,000 × 0.015 = $135
, 6. Using time value of money tables (Exhibit 1–3 or chapter appendix tables), calculate the following.
(LO 1.3)
a. The future value of $550 six years from now at 7 percent.
$550 × 1.501 = $825.55 (Exhibit 1-A)
b. The future value of $900 saved each year for 10 years at 8 percent.
$900 × 14.487 = $13,038.30 (Exhibit 1-B)
c. The amount a person would have to deposit today (present value) at a 5 percent interest rate to
have $1,000 five years from now.
$1,000 × 0.784 = $784 (Exhibit 1-C)
d. The amount a person would have to deposit today to be able to take out $500 a year for 10 years
from an account earning 8 percent.
$500 × 6.710 = $3,355 (Exhibit 1-D)
7. If you desire to have $12,000 for a down payment for a house in five years, what amount would
you need to deposit today? Assume that your money will earn 4 percent. (LO 1.3)
$12,000 × 0.822 = $9,864 (Exhibit 1-C)
8. Pete Morton is planning to go to graduate school in a program of study that will take three years.
Pete wants to have $8,000 available each year for various school and living expenses. If he earns 3
percent on his money, how much must he deposit at the start of his studies to be able to withdraw
$8,000 a year for three years? (LO 1.3)
$8,000 × 2.829 = $22,632 (Exhibit 1-D)
9. Carla Lopez deposits $2,800 a year into her retirement account. If these funds have an average
earning of 7 percent over the 40 years until her retirement, what will be the value of her retirement
account? (LO 1.3)
$2,800 × 199.635 = $558,978 (Exhibit 1-B)
10. If a person spends $10 a week on coffee (assume $500 a year), what would be the future value of
that amount over 10 years if the funds were deposited in an account earning 3 percent? (LO 1.3)
$500 × 11.464 = $5,732 (Exhibit 1-B)
