SOLUTION MANUAL
Personal Finance, 14th Edition
By E. Thomas Garman, Chapter 1 - 17
,TABLE OF CONTENTS 5s 5s 5s
Part I: FINANCIAL PLANNING.
5s 5s 5s
1. Understanding Personal Finance.
5s 5s 5s
2. Career Planning.
5s 5s
3. Financial Statements, Goals, and Budgets.
5s 5s 5s 5s 5s
Part II: MONEY MANAGEMENT.
5s 5s 5s
4. Managing Income Taxes.
5s 5s 5s
5. Managing Checking and Savings Accounts.
5s 5s 5s 5s 5s
6. Building and Maintaining Good Credit.
5s 5s 5s 5s 5s
7. Credit Cards and Consumer Loans.
5s 5s 5s 5s 5s
8. Vehicles and Other Major Purchases.
5s 5s 5s 5s 5s
9. Obtaining Affordable Housing.
5s 5s 5s
Part III: INCOME AND ASSET PROTECTION.
5s 5s 5s 5s 5s
10. Managing Property and Liability Risk.
5s 5s 5s 5s 5s
11. Planning for Health Care Expenses.
5s 5s 5s 5s 5s
12. Life Insurance Planning.
5s 5s 5s
Part IV: INVESTMENTS.
5s 5s
13. Investment Fundamentals.
5s 5s
14. Investing in Stocks and Bonds.
5s 5s 5s 5s 5s
15. Mutual and Exchange-Traded Funds.
5s 5s 5s 5s
16. Real Estate and High-Risk Investments.
5s 5s 5s 5s 5s
17. Retirement and Estate Planning.
5s 5s 5s 5s
,Solution and Answer Guide 5s 5s 5s
GARMAN/FOX,5 S PERSONAL5 S FINANCE5 S 14E,5 S CHAPTER5 S 1:5 S THINKING5 S LIKE5 S A5 S FINANCIAL5 S PLANNER
TABLE OF CONTENTS5S 5S
Answers5sto5sChapter5sConcept5sChecks ..................................................................................................... 2
What5sDo5sYou5sRecommend5sNow? ........................................................................................................... 4
Let’s5sTalk5sAbout5sIt ................................................................................................................................... 5
Do5sthe5sMath ............................................................................................................................................... 6
Financial5sPlanning5sCases .......................................................................................................................... 8
Extended5sLearning ................................................................................................................................... 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
5S 5S 5S 5S
LO1.15sRecognize5sthe5skeys5sto5sachieving5sfinancial5ssuccess.
1. Explain5sthe5sfive5ssteps5sin5sthe5sfinancial5splanning5sprocess.
Answer:5sThere5sare5sfive5sfundamental5ssteps5sto5sthe5spersonal5sfinancial5splanning5sprocess:5s(1)5sevaluate
5syour5sfinancial5shealth5sto5syour5seducation5sand5scareer5schoice;5s(2)5sdefine5syour5sfinancial5sgoals;5s(3)5sde
velop5sa5splan5sof5saction5sto5sachieve5syour5sgoals;5s(4)5simplement5sspending5sand5ssaving5splans5sto5smonit
or5sand5scontrol5sprogress5stoward5syour5sgoals;5sand5s(5)5sreview5syour5sfinancial5sprogress5sand5smake5scha
nges5sas5sappropriate.
2. Distinguish5samong5sfinancial5ssuccess,5sfinancial5ssecurity,5sand5sfinancial5shappiness.
Answer:5sFinancial5ssuccess5sis5sthe5sachievement5sof5sfinancial5saspirations5sthat5sare5sdesired,5splanned,5s
or5sattempted.5sSuccess5sis5sdefined5sby5sthe5sindividual5sor5sfamily5sthat5sseeks5sit.5sFinancial5ssuccess5smay5sb
e5sdefined5sas5sbeing5sable5sto5slive5saccording5sto5sone’s5sstandard5sof5sliving.5sFinancial5ssecurity5sis5sthat5sc
omfortable5sfeeling5sthat5syour5sfinancial5sresources5swill5sbe5sadequate5sto5sfulfill5sany5sneeds5syou5shave5sas
5swell5sas5syour5swants.5sFinancial5shappiness5sis5sthe5sexperience5syou5shave5s when5syou5sare5ssatisfied5s wit
h5smoney5smatters.5sPeople5swho5sare5shappy5sabout5stheir5sfinances5swill5ssee5sa5sspillover5sinto5spositive5sfe
elings5sabout5slife5sin5sgeneral.
3. Summarize5swhat5syou5swill5saccomplish5sstudying5spersonal5sfinance.
Answer:5sSeveral5sthings5scan5sbe5saccomplished5sby5sstudying5spersonal5sfinance.5sRecognize5show5sto5smana
ge5sunexpected5sand5sexpected5sfinancial5sevents.5sPay5sas5slittle5sas5spossible5sin5sincome5staxes.5sUnderstand5s
how5sto5seffectively5scomparison5sshop5sfor5svehicles5sand5shomes.5sProtect5swhat5swe5sown.5sInvest5swisely.5sAc
cumulate5sand5sprotect5sthe5swealth5sthat5swe5smay5schoose5sto5sspend5sduring5sour5snon-
working5syears5s(e.g.,5sretirement)5sor5sdonate.
4. What5sare5sthe5sbuilding5sblocks5sto5sachieving5sfinancial5ssuccess?
Answer:5sThe5sbuilding5sblocks5sfor5sachieving5sfinancial5ssuccess5sinclude5sa5sfoundation5sof5sregular5sinco
me5sthat5sprovides5sthe5smeans5sto5ssupport5syour5slifestyle5sand5ssave5sfor5sdesired5sgoals5sin5sthe5sfuture.5sT
he5sfoundation5ssupports5sa5sbase5sof5svarious5sbanking5saccounts,5sinsurance5sprotection,5sand5semployee5sb
enefits.5sThen5swe5scan5sestablish5sgoals,5sa5srecordkeeping5ssystem,5sa5sbudget,5sand5san5semergency5ssaving
s5sfund.5sWe5swill5salso5smanage5svarious5sexpenses5ssuch5sas5shousing,5stransportation,5sinsurance,5sand5sthe5
spayment5sof5staxes.5sWe5swill5salso5sneed5sto5shandle5scredit,5ssavings,5sand5seducational5scosts.5sFinally,5s we
5sinvest5sin5svarious5sinvestment5salternatives5ssuch5sas5smutual5sfunds,5sstocks,5sand5sbonds,5soften5sfor5sretir
ement.5sAs5sa5sresult5sof5sall5sthese5sbuilding5sblocks,5swe5sare5smore5sapt5sto5shave5sa5sfinancially5ssuccessful
5slife.
LO1.25sUnderstand5show5sthe5seconomy5saffects5syour5spersonal5sfinancial5ssuccess.
1. Summarize5sthe5sphases5sof5sthe5sbusiness5scycle.
Answer:5sThe5sbusiness5scycle5sentails5sa5swavelike5spattern5sof5srising5sand5sfalling5seconomic5sactivity5sas5s
measured5sby5seconomic5sindicators5slike5sunemployment5srates5sor5sthe5sgross5sdomestic5sproduct.5sThe5spha
ses5sof5sthe5sbusiness5scycle5sinclude5sexpansion5s(preferred5sstage—
production5sis5shigh,5sunemployment5slow,5sinterest5srates5slow5sor5sfalling,5sstock5smarket5sand5sconsumer5s
demand5shigh),5speak,5scontraction,5sdownturn,5strough,5sand5srecovery.
2. Describe5stwo5sstatistics5sthat5shelp5spredict5sthe5sfuture5sdirection5sof5sthe5seconomy.
Answer:5sForecasting5sthe5sstate5sof5sthe5seconomy5sinvolves5spredicting,5sestimating,5sor5scalculating5swhat
5swill5shappen5sin5sadvance.5sWe5sneed5sto5sbe5sable5sto5sforecast5sthe5sstate5sof5sthe5seconomy,5sinflation,5sand
Personal Finance, 14th Edition
By E. Thomas Garman, Chapter 1 - 17
,TABLE OF CONTENTS 5s 5s 5s
Part I: FINANCIAL PLANNING.
5s 5s 5s
1. Understanding Personal Finance.
5s 5s 5s
2. Career Planning.
5s 5s
3. Financial Statements, Goals, and Budgets.
5s 5s 5s 5s 5s
Part II: MONEY MANAGEMENT.
5s 5s 5s
4. Managing Income Taxes.
5s 5s 5s
5. Managing Checking and Savings Accounts.
5s 5s 5s 5s 5s
6. Building and Maintaining Good Credit.
5s 5s 5s 5s 5s
7. Credit Cards and Consumer Loans.
5s 5s 5s 5s 5s
8. Vehicles and Other Major Purchases.
5s 5s 5s 5s 5s
9. Obtaining Affordable Housing.
5s 5s 5s
Part III: INCOME AND ASSET PROTECTION.
5s 5s 5s 5s 5s
10. Managing Property and Liability Risk.
5s 5s 5s 5s 5s
11. Planning for Health Care Expenses.
5s 5s 5s 5s 5s
12. Life Insurance Planning.
5s 5s 5s
Part IV: INVESTMENTS.
5s 5s
13. Investment Fundamentals.
5s 5s
14. Investing in Stocks and Bonds.
5s 5s 5s 5s 5s
15. Mutual and Exchange-Traded Funds.
5s 5s 5s 5s
16. Real Estate and High-Risk Investments.
5s 5s 5s 5s 5s
17. Retirement and Estate Planning.
5s 5s 5s 5s
,Solution and Answer Guide 5s 5s 5s
GARMAN/FOX,5 S PERSONAL5 S FINANCE5 S 14E,5 S CHAPTER5 S 1:5 S THINKING5 S LIKE5 S A5 S FINANCIAL5 S PLANNER
TABLE OF CONTENTS5S 5S
Answers5sto5sChapter5sConcept5sChecks ..................................................................................................... 2
What5sDo5sYou5sRecommend5sNow? ........................................................................................................... 4
Let’s5sTalk5sAbout5sIt ................................................................................................................................... 5
Do5sthe5sMath ............................................................................................................................................... 6
Financial5sPlanning5sCases .......................................................................................................................... 8
Extended5sLearning ................................................................................................................................... 10
, ANSWERS TO CHAPTER CONCEPT CHECKS
5S 5S 5S 5S
LO1.15sRecognize5sthe5skeys5sto5sachieving5sfinancial5ssuccess.
1. Explain5sthe5sfive5ssteps5sin5sthe5sfinancial5splanning5sprocess.
Answer:5sThere5sare5sfive5sfundamental5ssteps5sto5sthe5spersonal5sfinancial5splanning5sprocess:5s(1)5sevaluate
5syour5sfinancial5shealth5sto5syour5seducation5sand5scareer5schoice;5s(2)5sdefine5syour5sfinancial5sgoals;5s(3)5sde
velop5sa5splan5sof5saction5sto5sachieve5syour5sgoals;5s(4)5simplement5sspending5sand5ssaving5splans5sto5smonit
or5sand5scontrol5sprogress5stoward5syour5sgoals;5sand5s(5)5sreview5syour5sfinancial5sprogress5sand5smake5scha
nges5sas5sappropriate.
2. Distinguish5samong5sfinancial5ssuccess,5sfinancial5ssecurity,5sand5sfinancial5shappiness.
Answer:5sFinancial5ssuccess5sis5sthe5sachievement5sof5sfinancial5saspirations5sthat5sare5sdesired,5splanned,5s
or5sattempted.5sSuccess5sis5sdefined5sby5sthe5sindividual5sor5sfamily5sthat5sseeks5sit.5sFinancial5ssuccess5smay5sb
e5sdefined5sas5sbeing5sable5sto5slive5saccording5sto5sone’s5sstandard5sof5sliving.5sFinancial5ssecurity5sis5sthat5sc
omfortable5sfeeling5sthat5syour5sfinancial5sresources5swill5sbe5sadequate5sto5sfulfill5sany5sneeds5syou5shave5sas
5swell5sas5syour5swants.5sFinancial5shappiness5sis5sthe5sexperience5syou5shave5s when5syou5sare5ssatisfied5s wit
h5smoney5smatters.5sPeople5swho5sare5shappy5sabout5stheir5sfinances5swill5ssee5sa5sspillover5sinto5spositive5sfe
elings5sabout5slife5sin5sgeneral.
3. Summarize5swhat5syou5swill5saccomplish5sstudying5spersonal5sfinance.
Answer:5sSeveral5sthings5scan5sbe5saccomplished5sby5sstudying5spersonal5sfinance.5sRecognize5show5sto5smana
ge5sunexpected5sand5sexpected5sfinancial5sevents.5sPay5sas5slittle5sas5spossible5sin5sincome5staxes.5sUnderstand5s
how5sto5seffectively5scomparison5sshop5sfor5svehicles5sand5shomes.5sProtect5swhat5swe5sown.5sInvest5swisely.5sAc
cumulate5sand5sprotect5sthe5swealth5sthat5swe5smay5schoose5sto5sspend5sduring5sour5snon-
working5syears5s(e.g.,5sretirement)5sor5sdonate.
4. What5sare5sthe5sbuilding5sblocks5sto5sachieving5sfinancial5ssuccess?
Answer:5sThe5sbuilding5sblocks5sfor5sachieving5sfinancial5ssuccess5sinclude5sa5sfoundation5sof5sregular5sinco
me5sthat5sprovides5sthe5smeans5sto5ssupport5syour5slifestyle5sand5ssave5sfor5sdesired5sgoals5sin5sthe5sfuture.5sT
he5sfoundation5ssupports5sa5sbase5sof5svarious5sbanking5saccounts,5sinsurance5sprotection,5sand5semployee5sb
enefits.5sThen5swe5scan5sestablish5sgoals,5sa5srecordkeeping5ssystem,5sa5sbudget,5sand5san5semergency5ssaving
s5sfund.5sWe5swill5salso5smanage5svarious5sexpenses5ssuch5sas5shousing,5stransportation,5sinsurance,5sand5sthe5
spayment5sof5staxes.5sWe5swill5salso5sneed5sto5shandle5scredit,5ssavings,5sand5seducational5scosts.5sFinally,5s we
5sinvest5sin5svarious5sinvestment5salternatives5ssuch5sas5smutual5sfunds,5sstocks,5sand5sbonds,5soften5sfor5sretir
ement.5sAs5sa5sresult5sof5sall5sthese5sbuilding5sblocks,5swe5sare5smore5sapt5sto5shave5sa5sfinancially5ssuccessful
5slife.
LO1.25sUnderstand5show5sthe5seconomy5saffects5syour5spersonal5sfinancial5ssuccess.
1. Summarize5sthe5sphases5sof5sthe5sbusiness5scycle.
Answer:5sThe5sbusiness5scycle5sentails5sa5swavelike5spattern5sof5srising5sand5sfalling5seconomic5sactivity5sas5s
measured5sby5seconomic5sindicators5slike5sunemployment5srates5sor5sthe5sgross5sdomestic5sproduct.5sThe5spha
ses5sof5sthe5sbusiness5scycle5sinclude5sexpansion5s(preferred5sstage—
production5sis5shigh,5sunemployment5slow,5sinterest5srates5slow5sor5sfalling,5sstock5smarket5sand5sconsumer5s
demand5shigh),5speak,5scontraction,5sdownturn,5strough,5sand5srecovery.
2. Describe5stwo5sstatistics5sthat5shelp5spredict5sthe5sfuture5sdirection5sof5sthe5seconomy.
Answer:5sForecasting5sthe5sstate5sof5sthe5seconomy5sinvolves5spredicting,5sestimating,5sor5scalculating5swhat
5swill5shappen5sin5sadvance.5sWe5sneed5sto5sbe5sable5sto5sforecast5sthe5sstate5sof5sthe5seconomy,5sinflation,5sand
