SOLUTION MANUAL FOR j j
FocusjonjPersonaljFinance,j7thjEdition
Chapterj1-14
Chapterj1
(Note:jSomejofjthesejproblemsjrequirejthejusejofjthejtimejvaluejofjmoneyjtablesjinjthejchapterjappe
ndix,jajfinancialjcalculator,jorjspreadsheetjsoftware.)
1. Usingjthejrulejofj72,japproximatejthejfollowingjamounts.j(LOj1.1)
a. Ifjthejvaluejofjlandjinjanjareajisjincreasingj6jpercentjajyear,jhowjlongjwilljitjtakejforjpropertyjvalue
sjtojdouble?
Aboutj12jyearsj(72j/j6)
b. Ifjyoujearnj10jpercentjonjyourjinvestments,jhowjlongjwilljitjtakejforjyourjmoneyjtoj double?
Aboutj7.2jyearsj(72j/j10)
c. Atjanjannualjinterestjratejofj5jpercent,jhowjlongjwilljitjtakejforjyourjsavingsjtojdouble?
Aboutj14.4jyearsj(72j/j5)
2. Inj2019,jselectedjautomobilesjhadjanjaveragejcostjofj$16,000.jThejaveragejcostjofjthosejsamejauto
mobilesjisjnowj$20,000.jWhatjwasjthejratejofjincreasejforjthesejautomobilesjbetweenjthejtwojtimejperi
ods?j(LOj1.1)
($20,000j-j$16,000)j/j$16,000j=j.25j(25jpercent)
3. Ajfamilyjspendsj$46,000jajyearjforjlivingjexpenses.jIfjpricesjincreasejbyj3jpercentjajyearjforjthejnextjt
hreejyears,jwhatjamountjwilljthejfamilyjneedjforjtheirjlivingjexpensesjafterjthreejyears?j(LOj1.1)
46,000j j 1.09j=j$50,140;jorjusingjExhibitj1-A:j$46,000j j 1.093j=j$50,278
4. BenjCollinsjplansjtojbuyjajhousejforj$260,000.jIfjthejrealjestatejinjhisjareajisjexpectedjtojincreasejinjval
uejbyj2jpercentjeachjyear,jwhatjwilljitsjapproximatejvaluejbejsevenjyearsjfromjnow?j(LOj1.1)
$260,000j j 1.149j=j$298,740;jorjusingjExhibitj1-A:j$260,000j j 1.149j=j$298,740
5. Whatjwouldjbejthejyearlyjearningsjforjajpersonjwithj$9,000jinjsavingsjatjanjannualjinterestjratejof
1.5jpercent?j(LOj1.3)
Copyrightj©j2020jMcGraw-HilljEducation.jAlljrightsjreserved.jNojreproductionjorjdistributionjwithoutjthejpriorjwrittenjconsentjofjMcGraw-Hill
Education.
, $9,000j j 0.015j=j$135
6. Usingjtimejvaluejofjmoneyjtablesj(Exhibitj1–
3jorjchapterjappendixjtables),jcalculatejthejfollowing.j(LOj1.3)
a. Thejfuturejvaluejofj$550jsixjyearsjfromjnowjatj7jpercent.
$550j j 1.501j=j$825.55j(Exhibitj1-A)
b. Thejfuturejvaluejofj$900jsavedjeachjyearjforj10jyearsjatj8jpercent.
$900j j 14.487j=j$13,038.30j(Exhibitj1-B)
c. Thejamountjajpersonjwouldjhavejtojdepositjtodayj(presentjvalue)jatjaj5jpercentjinterestjratejtojhavej
$1,000jfivejyearsjfromjnow.
$1,000j j 0.784j=j$784j(Exhibitj1-C)
d. Thejamountjajpersonjwouldjhavejtojdepositjtodayjtojbejablejtojtakejoutj$500jajyearjforj10jyearsjfromja
njaccountjearningj8jpercent.
$500j j 6.710j=j$3,355j(Exhibitj1-D)
7. Ifjyoujdesirejtojhavej$12,000jforjajdownjpaymentjforjajhousejinjfivejyears,jwhatjamountjwouldjyoujn
eedjtojdepositjtoday?jAssumejthatjyourjmoneyjwilljearnj4jpercent.j(LOj1.3)
$12,000j j 0.822j=j$9,864j(Exhibitj1-C)
8. PetejMortonjisjplanningjtojgojtojgraduatejschooljinjajprogramjofjstudyjthatjwilljtakejthreejyears.jPetej
wantsjtojhavej$8,000javailablejeachjyearjforjvariousjschooljandjlivingjexpenses.jIfjhejearnsj3jpercentjo
njhisjmoney,jhowjmuchjmustjhejdepositjatjthejstartjofjhisjstudiesjtojbejablejtojwithdraw
$8,000jajyearjforjthreejyears?j(LOj1.3)
$8,000j j 2.829j=j$22,632j(Exhibitj1-D)
9. CarlajLopezjdepositsj$2,800jajyearjintojherjretirementjaccount.jIfjthesejfundsjhavejanjaveragejearn
ingjofj7jpercentjoverjthej40jyearsjuntiljherjretirement,jwhatjwilljbejthejvaluejofjherjretirementjaccount?j(
LOj1.3)
$2,800j j 199.635j=j$558,978j(Exhibitj1-B)
10. Ifjajpersonjspendsj$10jajweekjonjcoffeej(assumej$500jajyear),jwhatjwouldjbejthejfuturejvaluejofjthatja
mountjoverj10jyearsjifjthejfundsjwerejdepositedjinjanjaccountjearningj3jpercent?j(LOj1.3)
$500j j 11.464j=j$5,732j(Exhibitj1-B)
Copyrightj©j2020jMcGraw-HilljEducation.jAlljrightsjreserved.jNojreproductionjorjdistributionjwithoutjthejpriorjwrittenjconsentjofjMcGraw-Hill
Education.
,11. Ajfinancialjcompanyjthatjadvertisesjonjtelevisionjwilljpayjyouj$60,000jnowjforjannualjpaymentsjofj$
10,000jthatjyoujarejexpectedjtojreceivejforjajlegaljsettlementjoverjthejnextj10jyears.jIfjyoujestimatejthejti
mejvaluejofjmoneyjatj10jpercent,jwouldjyoujacceptjthisjoffer?j(LOj1.3)
Thejpresentjvaluejofjthejannualjpaymentjisjcalculatedjas:j$10,000jXj6.145j=j$61,450jThej$6
0,000jbeingjofferedjnowjisjlessjthanjthejpresentjvaluejofjthejfuturejflow.
12. TranjLeejplansjtojsetjasidej$2,600jajyearjforjthejnextjsevenjyears,jearningj3jpercent.jWhatjwoul
djbejthejfuturejvaluejofjthisjsavingsjamount?j(LOj1.3)
$2,600jXj7.662j=j(futurejvaluejofjajseries)j=j$19,921.20j(Exhibitj1-B)
13. Ifjyoujborrowj$8,000jwithjaj5jpercentjinterestjratejtojbejrepaidjinjfivejequaljpaymentsjatjthejendjofjthej
nextjfivejyears,jwhatjwouldjbejthejamountjofjeachjpayment?j(Note:jUsejthejpresentjvaluejofjanjannuityjt
ablejinjthejchapterjappendix.)j(LOj1.3)
$8,000j/j4.329j=j$1,848
(Note:jSomejofjthesejproblemsjrequirejthejusejofjthejtimejvaluejofjmoneyjtablesjinjthejChapt
erj1jAppendix,jajfinancialjcalculator,jorjspreadsheetjsoftware.)
Problemsj Chapterj2j-jSOLUTIONS
1. Basedjonjthejfollowingjdata,jdeterminejthejamountjofjtotaljassets,jtotaljliabilities,jandjnetjworth.j(LOj
2.2)
Liquidjassets,j$3,870
Investmentjassets,j$8,340j
Currentjliabilities,j$2,670
Householdjassets,j$87,890j
Long-termjliabilities,j$76,230
a. Totaljassetsj$
b. Totaljliabilitiesj$
c. Netjworthj$
Totaljassetsj=j$100,100j($3,870j+j8,340j+j87,890)
Totaljliabilitiesj=j$78,900j($2,670j+j$76,230)
Copyrightj©j2020jMcGraw-HilljEducation.jAlljrightsjreserved.jNojreproductionjorjdistributionjwithoutjthejpriorjwrittenjconsentjofjMcGraw-Hill
Education.
, Netjworthj=j$21,200j($100,100j-j$78,900)
Copyrightj©j2020jMcGraw-HilljEducation.jAlljrightsjreserved.jNojreproductionjorjdistributionjwithoutjthejpriorjwrittenjconsentjofjMcGraw-Hill
Education.
FocusjonjPersonaljFinance,j7thjEdition
Chapterj1-14
Chapterj1
(Note:jSomejofjthesejproblemsjrequirejthejusejofjthejtimejvaluejofjmoneyjtablesjinjthejchapterjappe
ndix,jajfinancialjcalculator,jorjspreadsheetjsoftware.)
1. Usingjthejrulejofj72,japproximatejthejfollowingjamounts.j(LOj1.1)
a. Ifjthejvaluejofjlandjinjanjareajisjincreasingj6jpercentjajyear,jhowjlongjwilljitjtakejforjpropertyjvalue
sjtojdouble?
Aboutj12jyearsj(72j/j6)
b. Ifjyoujearnj10jpercentjonjyourjinvestments,jhowjlongjwilljitjtakejforjyourjmoneyjtoj double?
Aboutj7.2jyearsj(72j/j10)
c. Atjanjannualjinterestjratejofj5jpercent,jhowjlongjwilljitjtakejforjyourjsavingsjtojdouble?
Aboutj14.4jyearsj(72j/j5)
2. Inj2019,jselectedjautomobilesjhadjanjaveragejcostjofj$16,000.jThejaveragejcostjofjthosejsamejauto
mobilesjisjnowj$20,000.jWhatjwasjthejratejofjincreasejforjthesejautomobilesjbetweenjthejtwojtimejperi
ods?j(LOj1.1)
($20,000j-j$16,000)j/j$16,000j=j.25j(25jpercent)
3. Ajfamilyjspendsj$46,000jajyearjforjlivingjexpenses.jIfjpricesjincreasejbyj3jpercentjajyearjforjthejnextjt
hreejyears,jwhatjamountjwilljthejfamilyjneedjforjtheirjlivingjexpensesjafterjthreejyears?j(LOj1.1)
46,000j j 1.09j=j$50,140;jorjusingjExhibitj1-A:j$46,000j j 1.093j=j$50,278
4. BenjCollinsjplansjtojbuyjajhousejforj$260,000.jIfjthejrealjestatejinjhisjareajisjexpectedjtojincreasejinjval
uejbyj2jpercentjeachjyear,jwhatjwilljitsjapproximatejvaluejbejsevenjyearsjfromjnow?j(LOj1.1)
$260,000j j 1.149j=j$298,740;jorjusingjExhibitj1-A:j$260,000j j 1.149j=j$298,740
5. Whatjwouldjbejthejyearlyjearningsjforjajpersonjwithj$9,000jinjsavingsjatjanjannualjinterestjratejof
1.5jpercent?j(LOj1.3)
Copyrightj©j2020jMcGraw-HilljEducation.jAlljrightsjreserved.jNojreproductionjorjdistributionjwithoutjthejpriorjwrittenjconsentjofjMcGraw-Hill
Education.
, $9,000j j 0.015j=j$135
6. Usingjtimejvaluejofjmoneyjtablesj(Exhibitj1–
3jorjchapterjappendixjtables),jcalculatejthejfollowing.j(LOj1.3)
a. Thejfuturejvaluejofj$550jsixjyearsjfromjnowjatj7jpercent.
$550j j 1.501j=j$825.55j(Exhibitj1-A)
b. Thejfuturejvaluejofj$900jsavedjeachjyearjforj10jyearsjatj8jpercent.
$900j j 14.487j=j$13,038.30j(Exhibitj1-B)
c. Thejamountjajpersonjwouldjhavejtojdepositjtodayj(presentjvalue)jatjaj5jpercentjinterestjratejtojhavej
$1,000jfivejyearsjfromjnow.
$1,000j j 0.784j=j$784j(Exhibitj1-C)
d. Thejamountjajpersonjwouldjhavejtojdepositjtodayjtojbejablejtojtakejoutj$500jajyearjforj10jyearsjfromja
njaccountjearningj8jpercent.
$500j j 6.710j=j$3,355j(Exhibitj1-D)
7. Ifjyoujdesirejtojhavej$12,000jforjajdownjpaymentjforjajhousejinjfivejyears,jwhatjamountjwouldjyoujn
eedjtojdepositjtoday?jAssumejthatjyourjmoneyjwilljearnj4jpercent.j(LOj1.3)
$12,000j j 0.822j=j$9,864j(Exhibitj1-C)
8. PetejMortonjisjplanningjtojgojtojgraduatejschooljinjajprogramjofjstudyjthatjwilljtakejthreejyears.jPetej
wantsjtojhavej$8,000javailablejeachjyearjforjvariousjschooljandjlivingjexpenses.jIfjhejearnsj3jpercentjo
njhisjmoney,jhowjmuchjmustjhejdepositjatjthejstartjofjhisjstudiesjtojbejablejtojwithdraw
$8,000jajyearjforjthreejyears?j(LOj1.3)
$8,000j j 2.829j=j$22,632j(Exhibitj1-D)
9. CarlajLopezjdepositsj$2,800jajyearjintojherjretirementjaccount.jIfjthesejfundsjhavejanjaveragejearn
ingjofj7jpercentjoverjthej40jyearsjuntiljherjretirement,jwhatjwilljbejthejvaluejofjherjretirementjaccount?j(
LOj1.3)
$2,800j j 199.635j=j$558,978j(Exhibitj1-B)
10. Ifjajpersonjspendsj$10jajweekjonjcoffeej(assumej$500jajyear),jwhatjwouldjbejthejfuturejvaluejofjthatja
mountjoverj10jyearsjifjthejfundsjwerejdepositedjinjanjaccountjearningj3jpercent?j(LOj1.3)
$500j j 11.464j=j$5,732j(Exhibitj1-B)
Copyrightj©j2020jMcGraw-HilljEducation.jAlljrightsjreserved.jNojreproductionjorjdistributionjwithoutjthejpriorjwrittenjconsentjofjMcGraw-Hill
Education.
,11. Ajfinancialjcompanyjthatjadvertisesjonjtelevisionjwilljpayjyouj$60,000jnowjforjannualjpaymentsjofj$
10,000jthatjyoujarejexpectedjtojreceivejforjajlegaljsettlementjoverjthejnextj10jyears.jIfjyoujestimatejthejti
mejvaluejofjmoneyjatj10jpercent,jwouldjyoujacceptjthisjoffer?j(LOj1.3)
Thejpresentjvaluejofjthejannualjpaymentjisjcalculatedjas:j$10,000jXj6.145j=j$61,450jThej$6
0,000jbeingjofferedjnowjisjlessjthanjthejpresentjvaluejofjthejfuturejflow.
12. TranjLeejplansjtojsetjasidej$2,600jajyearjforjthejnextjsevenjyears,jearningj3jpercent.jWhatjwoul
djbejthejfuturejvaluejofjthisjsavingsjamount?j(LOj1.3)
$2,600jXj7.662j=j(futurejvaluejofjajseries)j=j$19,921.20j(Exhibitj1-B)
13. Ifjyoujborrowj$8,000jwithjaj5jpercentjinterestjratejtojbejrepaidjinjfivejequaljpaymentsjatjthejendjofjthej
nextjfivejyears,jwhatjwouldjbejthejamountjofjeachjpayment?j(Note:jUsejthejpresentjvaluejofjanjannuityjt
ablejinjthejchapterjappendix.)j(LOj1.3)
$8,000j/j4.329j=j$1,848
(Note:jSomejofjthesejproblemsjrequirejthejusejofjthejtimejvaluejofjmoneyjtablesjinjthejChapt
erj1jAppendix,jajfinancialjcalculator,jorjspreadsheetjsoftware.)
Problemsj Chapterj2j-jSOLUTIONS
1. Basedjonjthejfollowingjdata,jdeterminejthejamountjofjtotaljassets,jtotaljliabilities,jandjnetjworth.j(LOj
2.2)
Liquidjassets,j$3,870
Investmentjassets,j$8,340j
Currentjliabilities,j$2,670
Householdjassets,j$87,890j
Long-termjliabilities,j$76,230
a. Totaljassetsj$
b. Totaljliabilitiesj$
c. Netjworthj$
Totaljassetsj=j$100,100j($3,870j+j8,340j+j87,890)
Totaljliabilitiesj=j$78,900j($2,670j+j$76,230)
Copyrightj©j2020jMcGraw-HilljEducation.jAlljrightsjreserved.jNojreproductionjorjdistributionjwithoutjthejpriorjwrittenjconsentjofjMcGraw-Hill
Education.
, Netjworthj=j$21,200j($100,100j-j$78,900)
Copyrightj©j2020jMcGraw-HilljEducation.jAlljrightsjreserved.jNojreproductionjorjdistributionjwithoutjthejpriorjwrittenjconsentjofjMcGraw-Hill
Education.
