SCHOLARVAULT
SOLUTION MANUAL FOR
Focus on Personal Finance, 7th Edition
Chapter 1-14
Chapter 1
(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)
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,SCHOLARVAULT
$9,000 # a c # a c 0.015 #ac= #ac$135
6. Using #actime #acvalue #acof #acmoney #actables #ac(Exhibit #ac1–3 #acor #acchapter #acappendix #actables), #accalculate
#acthe #acfollowing. #ac(LO #ac1.3)
a. The #acfuture #acvalue #acof #ac$550 #acsix #acyears #acfrom #acnow #acat #ac7 #acpercent.
$550 # a c # a c 1.501 #ac= #ac$825.55 #ac(Exhibit #ac1-A)
b. The #acfuture #acvalue #acof #ac$900 #acsaved #aceach #acyear #acfor #ac10 #acyears #acat #ac8 #acpercent.
$900 # a c # a c 14.487 #ac= #ac$13,038.30 #ac(Exhibit #ac1-B)
c. The #acamount #aca #acperson #acwould #achave #acto #acdeposit #actoday #ac(present #acvalue) #acat #aca #ac5
#acpercent #acinterest #acrate #acto #achave #ac$1,000 #acfive #acyears #acfrom #acnow.
$1,000 # a c # a c 0.784 #ac= #ac$784 #ac(Exhibit #ac1-C)
d. The #acamount #aca #acperson #acwould #achave #acto #acdeposit #actoday #acto #acbe #acable #acto #actake #acout #ac$500
#aca #acyear #acfor #ac10 #acyears #acfrom #acan #acaccount #acearning #ac8 #acpercent.
$500 # a c # a c 6.710 #ac= #ac$3,355 #ac(Exhibit #ac1-D)
7. If #acyou #acdesire #acto #achave #ac$12,000 #acfor #aca #acdown #acpayment #acfor #aca #achouse #acin #acfive #acyears,
#acwhat #acamount #acwould #acyou #acneed #acto #acdeposit #actoday? #acAssume #acthat #acyour #acmoney #acwill
#acearn #ac4 #acpercent. #ac(LO #ac1.3)
$12,000 # a c # a c 0.822 #ac= #ac$9,864 #ac(Exhibit #ac1-C)
8. Pete #acMorton #acis #acplanning #acto #acgo #acto #acgraduate #acschool #acin #aca #acprogram #acof #acstudy #acthat #acwill
#actake #acthree #acyears. #acPete #acwants #acto #achave #ac$8,000 #acavailable #aceach #acyear #acfor #acvarious #acschool
#acand #acliving #acexpenses. #acIf #ache #acearns #ac3 #acpercent #acon #achis #acmoney, #achow #acmuch #acmust #ache
#acdeposit #acat #acthe #acstart #acof #achis #acstudies #acto #acbe #acable #acto #acwithdraw
$8,000 #aca #acyear #acfor #acthree #acyears? #ac(LO #ac1.3)
$8,000 # a c # a c 2.829 #ac= #ac$22,632 #ac(Exhibit #ac1-D)
9. Carla #acLopez #acdeposits #ac$2,800 #aca #acyear #acinto #acher #acretirement #acaccount. #acIf #acthese #acfunds
#achave #acan #acaverage #acearning #acof #ac7 #acpercent #acover #acthe #ac40 #acyears #acuntil #acher #acretirement,
#acwhat #acwill #acbe #acthe #acvalue #acof #acher #acretirement #acaccount? #ac(LO #ac1.3)
$2,800 # a c # a c 199.635 #ac= #ac$558,978 #ac(Exhibit #ac1-B)
10. If #aca #acperson #acspends #ac$10 #aca #acweek #acon #accoffee #ac(assume #ac$500 #aca #acyear), #acwhat #acwould #acbe
#acthe #acfuture #acvalue #acof #acthat #acamount #acover #ac10 #acyears #acif #acthe #acfunds #acwere #acdeposited #acin #acan
#acaccount #acearning #ac3 #acpercent? #ac(LO #ac1.3)
Copyright #ac© #ac2020 #acMcGraw-Hill #acEducation. #acAll #acrights #acreserved. #acNo #acreproduction #acor #acdistribution #acwithout #acthe #acprior #acwritten
#acconsent #acof #acMcGraw-Hill
Education.
,SCHOLARVAULT
$500 # a c # a c 11.464 #ac= #ac$5,732 #ac(Exhibit #ac1-B)
Copyright #ac© #ac2020 #acMcGraw-Hill #acEducation. #acAll #acrights #acreserved. #acNo #acreproduction #acor #acdistribution #acwithout #acthe #acprior #acwritten
#acconsent #acof #acMcGraw-Hill
Education.
, SCHOLARVAULT
11. A #acfinancial #accompany #acthat #acadvertises #acon #actelevision #acwill #acpay #acyou #ac$60,000 #acnow #acfor
#acannual #acpayments #acof #ac$10,000 #acthat #acyou #acare #acexpected #acto #acreceive #acfor #aca #aclegal #acsettlement
#acover #acthe #acnext #ac10 #acyears. #acIf #acyou #acestimate #acthe #actime #acvalue #acof #acmoney #acat #ac10 #acpercent,
#acwould #acyou #acaccept #acthis #acoffer? #ac(LO #ac1.3)
The #acpresent #acvalue #acof #acthe #acannual #acpayment #acis #accalculated #acas: #ac$10,000 #acX #ac6.145
#ac= #ac$61,450 #acThe #ac$60,000 #acbeing #acoffered #acnow #acis #acless #acthan #acthe #acpresent #acvalue
#acof #acthe #acfuture #acflow.
12. Tran #acLee #acplans #acto #acset #acaside #ac$2,600 #aca #acyear #acfor #acthe #acnext #acseven #acyears, #acearning
#ac3 #acpercent. #acWhat #acwould #acbe #acthe #acfuture #acvalue #acof #acthis #acsavings #acamount? #ac(LO #ac1.3)
$2,600 #acX #ac7.662 #ac= #ac(future #acvalue #acof #aca #acseries) #ac= #ac$19,921.20 #ac(Exhibit #ac1-B)
13. If #acyou #acborrow #ac$8,000 #acwith #aca #ac5 #acpercent #acinterest #acrate #acto #acbe #acrepaid #acin #acfive #acequal
#acpayments #acat #acthe #acend #acof #acthe #acnext #acfive #acyears, #acwhat #acwould #acbe #acthe #acamount #acof #aceach
#acpayment? #ac(Note: #acUse #acthe #acpresent #acvalue #acof #acan #acannuity #actable #acin #acthe #acchapter
#acappendix.) #ac(LO #ac1.3)
$8,000 #ac/ #ac4.329 #ac= #ac$1,848
(Note: Some of these problems require the use of the time value of money
#ac #ac #ac #ac #ac #ac #ac #ac #ac #ac #ac #ac #ac
tables in the Chapter 1 Appendix, a financial calculator, or spreadsheet
#ac #ac #ac #ac #ac #ac #ac #ac #ac #ac #ac
software.)
#ac
Problems # a c Chapter #ac2 #ac- #acSOLUTIONS
1. Based #acon #acthe #acfollowing #acdata, #acdetermine #acthe #acamount #acof #actotal #acassets, #actotal #acliabilities,
#acand #acnet #acworth. #ac(LO #ac2.2)
Liquid #acassets, #ac$3,870 Investment #acassets,
#ac$8,340 #acCurrent #acliabilities, #ac$2,670 Household #acassets,
#ac$87,890 #acLong-term #acliabilities, #ac$76,230
a. Total #acassets #ac$
b. Total #acliabilities #ac$
c. Net #acworth #ac$
Copyright #ac© #ac2020 #acMcGraw-Hill #acEducation. #acAll #acrights #acreserved. #acNo #acreproduction #acor #acdistribution #acwithout #acthe #acprior #acwritten
#acconsent #acof #acMcGraw-Hill
Education.
SOLUTION MANUAL FOR
Focus on Personal Finance, 7th Edition
Chapter 1-14
Chapter 1
(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)
Copyright #ac© #ac2020 #acMcGraw-Hill #acEducation. #acAll #acrights #acreserved. #acNo #acreproduction #acor #acdistribution #acwithout #acthe #acprior #acwritten
#acconsent #acof #acMcGraw-Hill
Education.
,SCHOLARVAULT
$9,000 # a c # a c 0.015 #ac= #ac$135
6. Using #actime #acvalue #acof #acmoney #actables #ac(Exhibit #ac1–3 #acor #acchapter #acappendix #actables), #accalculate
#acthe #acfollowing. #ac(LO #ac1.3)
a. The #acfuture #acvalue #acof #ac$550 #acsix #acyears #acfrom #acnow #acat #ac7 #acpercent.
$550 # a c # a c 1.501 #ac= #ac$825.55 #ac(Exhibit #ac1-A)
b. The #acfuture #acvalue #acof #ac$900 #acsaved #aceach #acyear #acfor #ac10 #acyears #acat #ac8 #acpercent.
$900 # a c # a c 14.487 #ac= #ac$13,038.30 #ac(Exhibit #ac1-B)
c. The #acamount #aca #acperson #acwould #achave #acto #acdeposit #actoday #ac(present #acvalue) #acat #aca #ac5
#acpercent #acinterest #acrate #acto #achave #ac$1,000 #acfive #acyears #acfrom #acnow.
$1,000 # a c # a c 0.784 #ac= #ac$784 #ac(Exhibit #ac1-C)
d. The #acamount #aca #acperson #acwould #achave #acto #acdeposit #actoday #acto #acbe #acable #acto #actake #acout #ac$500
#aca #acyear #acfor #ac10 #acyears #acfrom #acan #acaccount #acearning #ac8 #acpercent.
$500 # a c # a c 6.710 #ac= #ac$3,355 #ac(Exhibit #ac1-D)
7. If #acyou #acdesire #acto #achave #ac$12,000 #acfor #aca #acdown #acpayment #acfor #aca #achouse #acin #acfive #acyears,
#acwhat #acamount #acwould #acyou #acneed #acto #acdeposit #actoday? #acAssume #acthat #acyour #acmoney #acwill
#acearn #ac4 #acpercent. #ac(LO #ac1.3)
$12,000 # a c # a c 0.822 #ac= #ac$9,864 #ac(Exhibit #ac1-C)
8. Pete #acMorton #acis #acplanning #acto #acgo #acto #acgraduate #acschool #acin #aca #acprogram #acof #acstudy #acthat #acwill
#actake #acthree #acyears. #acPete #acwants #acto #achave #ac$8,000 #acavailable #aceach #acyear #acfor #acvarious #acschool
#acand #acliving #acexpenses. #acIf #ache #acearns #ac3 #acpercent #acon #achis #acmoney, #achow #acmuch #acmust #ache
#acdeposit #acat #acthe #acstart #acof #achis #acstudies #acto #acbe #acable #acto #acwithdraw
$8,000 #aca #acyear #acfor #acthree #acyears? #ac(LO #ac1.3)
$8,000 # a c # a c 2.829 #ac= #ac$22,632 #ac(Exhibit #ac1-D)
9. Carla #acLopez #acdeposits #ac$2,800 #aca #acyear #acinto #acher #acretirement #acaccount. #acIf #acthese #acfunds
#achave #acan #acaverage #acearning #acof #ac7 #acpercent #acover #acthe #ac40 #acyears #acuntil #acher #acretirement,
#acwhat #acwill #acbe #acthe #acvalue #acof #acher #acretirement #acaccount? #ac(LO #ac1.3)
$2,800 # a c # a c 199.635 #ac= #ac$558,978 #ac(Exhibit #ac1-B)
10. If #aca #acperson #acspends #ac$10 #aca #acweek #acon #accoffee #ac(assume #ac$500 #aca #acyear), #acwhat #acwould #acbe
#acthe #acfuture #acvalue #acof #acthat #acamount #acover #ac10 #acyears #acif #acthe #acfunds #acwere #acdeposited #acin #acan
#acaccount #acearning #ac3 #acpercent? #ac(LO #ac1.3)
Copyright #ac© #ac2020 #acMcGraw-Hill #acEducation. #acAll #acrights #acreserved. #acNo #acreproduction #acor #acdistribution #acwithout #acthe #acprior #acwritten
#acconsent #acof #acMcGraw-Hill
Education.
,SCHOLARVAULT
$500 # a c # a c 11.464 #ac= #ac$5,732 #ac(Exhibit #ac1-B)
Copyright #ac© #ac2020 #acMcGraw-Hill #acEducation. #acAll #acrights #acreserved. #acNo #acreproduction #acor #acdistribution #acwithout #acthe #acprior #acwritten
#acconsent #acof #acMcGraw-Hill
Education.
, SCHOLARVAULT
11. A #acfinancial #accompany #acthat #acadvertises #acon #actelevision #acwill #acpay #acyou #ac$60,000 #acnow #acfor
#acannual #acpayments #acof #ac$10,000 #acthat #acyou #acare #acexpected #acto #acreceive #acfor #aca #aclegal #acsettlement
#acover #acthe #acnext #ac10 #acyears. #acIf #acyou #acestimate #acthe #actime #acvalue #acof #acmoney #acat #ac10 #acpercent,
#acwould #acyou #acaccept #acthis #acoffer? #ac(LO #ac1.3)
The #acpresent #acvalue #acof #acthe #acannual #acpayment #acis #accalculated #acas: #ac$10,000 #acX #ac6.145
#ac= #ac$61,450 #acThe #ac$60,000 #acbeing #acoffered #acnow #acis #acless #acthan #acthe #acpresent #acvalue
#acof #acthe #acfuture #acflow.
12. Tran #acLee #acplans #acto #acset #acaside #ac$2,600 #aca #acyear #acfor #acthe #acnext #acseven #acyears, #acearning
#ac3 #acpercent. #acWhat #acwould #acbe #acthe #acfuture #acvalue #acof #acthis #acsavings #acamount? #ac(LO #ac1.3)
$2,600 #acX #ac7.662 #ac= #ac(future #acvalue #acof #aca #acseries) #ac= #ac$19,921.20 #ac(Exhibit #ac1-B)
13. If #acyou #acborrow #ac$8,000 #acwith #aca #ac5 #acpercent #acinterest #acrate #acto #acbe #acrepaid #acin #acfive #acequal
#acpayments #acat #acthe #acend #acof #acthe #acnext #acfive #acyears, #acwhat #acwould #acbe #acthe #acamount #acof #aceach
#acpayment? #ac(Note: #acUse #acthe #acpresent #acvalue #acof #acan #acannuity #actable #acin #acthe #acchapter
#acappendix.) #ac(LO #ac1.3)
$8,000 #ac/ #ac4.329 #ac= #ac$1,848
(Note: Some of these problems require the use of the time value of money
#ac #ac #ac #ac #ac #ac #ac #ac #ac #ac #ac #ac #ac
tables in the Chapter 1 Appendix, a financial calculator, or spreadsheet
#ac #ac #ac #ac #ac #ac #ac #ac #ac #ac #ac
software.)
#ac
Problems # a c Chapter #ac2 #ac- #acSOLUTIONS
1. Based #acon #acthe #acfollowing #acdata, #acdetermine #acthe #acamount #acof #actotal #acassets, #actotal #acliabilities,
#acand #acnet #acworth. #ac(LO #ac2.2)
Liquid #acassets, #ac$3,870 Investment #acassets,
#ac$8,340 #acCurrent #acliabilities, #ac$2,670 Household #acassets,
#ac$87,890 #acLong-term #acliabilities, #ac$76,230
a. Total #acassets #ac$
b. Total #acliabilities #ac$
c. Net #acworth #ac$
Copyright #ac© #ac2020 #acMcGraw-Hill #acEducation. #acAll #acrights #acreserved. #acNo #acreproduction #acor #acdistribution #acwithout #acthe #acprior #acwritten
#acconsent #acof #acMcGraw-Hill
Education.
