SOLUTION MANUAL
Personal Finance 14th Edition
By E. Thomas all Chapter 1 - 17
TABLE OF CONTENTS
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,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 g g g
GARMAN/FOX, PERSONAL FINANCE 14E, CHAPTER 1: THINKING LIKE A FINANCIAL PLANNER
G G G G G G G G G G
TABLE OF CONTENTS G G
,AnswersgtogChaptergConceptgChecks ....................................................................................................... 2
WhatgDogYougRecommendgNow? ............................................................................................................ 4
Let’sgTalkgAboutgIt ................................................................................................................................... 5
DogthegMath ............................................................................................................................................ 6
FinancialgPlanninggCases .......................................................................................................................... 8
ExtendedgLearning................................................................................................................................. 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
G G G G
LO1.1gRecognizegthegkeysgtogachievinggfinancialgsuccess.
1. Explaingthegfivegstepsgingthegfinancialgplanninggprocess.
Answer:gTheregaregfivegfundamentalgstepsgtogthegpersonalgfinancialgplanninggprocess:g(1)gevaluategyourgfi
nancialghealthgtogyourgeducationgandgcareergchoice;g(2)gdefinegyourgfinancialggoals;g(3)gdevelopgagplangofgac
tiongtogachievegyourggoals;g(4)gimplementgspendinggandgsavinggplansgtogmonitorgandgcontrolgprogressgtow
ardgyourggoals;gandg(5)greviewgyourgfinancialgprogressgandgmakegchangesgasgappropriate.
2. Distinguishgamonggfinancialgsuccess,gfinancialgsecurity,gandgfinancialghappiness.
Answer:gFinancialgsuccessgisgthegachievementgofgfinancialgaspirationsgthatgaregdesired,gplanned,gorgattem
pted.gSuccessgisgdefinedgbygthegindividualgorgfamilygthatgseeksgit.gFinancialgsuccessgmaygbegdefinedgasgbeing
gablegtoglivegaccordinggtogone’sgstandardgofgliving. gFinancialgsecuritygisgthatgcomfortablegfeelinggthatgyourgf
inancialgresourcesgwillgbegadequategtogfulfillganygneedsgyoughavegasgwellgasgyourgwants.gFinancialghappine
ssgisgthegexperiencegyoughavegwhengyougaregsatisfiedgwithgmoneygmatters.gPeoplegwhogareghappygaboutgt
heirgfinancesgwillgseegagspillovergintogpositivegfeelingsgaboutglifeginggeneral.
3. Summarizegwhatgyougwillgaccomplishgstudyinggpersonalgfinance.
Answer:gSeveralgthingsgcangbegaccomplishedgbygstudyinggpersonalgfinance.gRecognizeghowgtogmanagegunexp
ectedgandgexpectedgfinancialgevents.gPaygasglittlegasgpossiblegingincomegtaxes.gUnderstandghowgtogeffectivelyg
comparisongshopgforgvehiclesgandghomes.gProtectgwhatgwegown.gInvestgwisely.gAccumulategandgprotectgtheg
wealthgthatgwegmaygchoosegtogspendgduringgourgnon-workinggyearsg(e.g.,gretirement)gorgdonate.
4. Whatgaregthegbuildinggblocksgtogachievinggfinancialgsuccess?
Answer:gThegbuildinggblocksgforgachievinggfinancialgsuccessgincludegagfoundationgofgregulargincomegthatgp
rovidesgthegmeansgtogsupportgyourglifestylegandgsavegforgdesiredggoalsgingthegfuture.gThegfoundationgsupp
ortsgagbasegofgvariousgbankinggaccounts,ginsurancegprotection,gandgemployeegbenefits.gThengwegcangestab
lishggoals,gagrecordkeepinggsystem,gagbudget,gandgangemergencygsavingsgfund.gWegwillgalsogmanagegvariou
sgexpensesgsuchgasghousing,gtransportation,ginsurance,gandgthegpaymentgofgtaxes.gWegwillgalsogneedgtogha
ndlegcredit,gsavings,gandgeducationalgcosts.gFinally,gweginvestgingvariousginvestmentgalternativesgsuchgasgm
utualgfunds,gstocks,gandgbonds,goftengforgretirement.gAsgagresultgofgallgthesegbuildinggblocks,gwegaregmoreg
aptgtoghavegagfinanciallygsuccessfulglife.
LO1.2gUnderstandghowgthegeconomygaffectsgyourgpersonalgfinancialgsuccess.
1. Summarizegthegphasesgofgthegbusinessgcycle.
Answer:gThegbusinessgcyclegentailsgagwavelikegpatterngofgrisinggandgfallinggeconomicgactivitygasgmeasuredg
bygeconomicgindicatorsglikegunemploymentgratesgorgtheggrossgdomesticgproduct.gThegphasesgofgthegbusine
ssgcyclegincludegexpansiong(preferredgstage—
productiongisghigh,gunemploymentglow,ginterestgratesglowgorgfalling,gstockgmarketgandgconsumergdemandg
high),gpeak,gcontraction,gdownturn,gtrough,gandgrecovery.
