Questions and Answers of Focus On Personal Finance

What is the future value of $800 at 8 percent after six years?
How much money must you set aside at age 20 to accumulate retirement funds of $100,000 at age 65, assuming a rate of interest of 7%?
A family spends $46,000 a year for living expenses. If prices increase by 2 percent a year for the next three years, what amount will the family need for their living expenses after three years?
How much would you have in savings if you kept $200 on deposit for eight years at 8 percent, compounded semiannually?
If you deposit $2,000 in a 5-year certificate of deposit at 5.2%, how much will it be worth in five years?
What is the future value of an annual deposit of $230 earning 6 percent for 15 years?
If you deposit $2,000 in a 5-year certificate of deposit at 5.2% with quarterly compounding, how much will it be worth in five years?
What amount would you have in a retirement account if you made annual deposits of $375 for 25 years earning 12 percent, compounded annually?
You choose to invest $50/month in a 401(k) that invests in an international stock mutual fund. Assuming an annual rate of return of 9%, how much will this fund be worth if you are retiring in 40
Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $70 for this service. Over a period of 10 years, how much does Elaine gain from preparing her own tax
What is the present value of $2,200 earning 15 percent for eight years?
You invest $600/year in a 401(k) that invests in an international stock mutual fund. Assuming an annual rate of return of 9%, how much will this fund be worth if you are retiring in 40 years?
To have $6,000 for a child’s education in 10 years, what amount should a parent deposit in a savings account that earns 12 percent, compounded quarterly?
What is the present value of a withdrawal of $200 at the end of each year for 14 years with an interest rate of 7 percent?
Carla Lopez deposits $3,400 a year into her retirement account. If these funds have an average earning of 9 percent over the 40 years until her retirement, what will be the value of her retirement
How much would you have to deposit now to be able to withdraw $650 at the end of each year for 20 years from an account that earns 11 percent?
What would be the annual payment amount for a $20,000, 10-year loan at 7 percent?
Mai Tran plans to set aside $2,400 a year for the next six years, earning 4 percent. What would be the future value of this savings amount?
Time value of money calculations are used to determine the value of potential retirement benefits. If a person deposits $1,800 a year in a retirement account earning 6 percent for 20 years, what will
Jenny Lopez estimates that as a result of completing her master’s degree, she will earn an additional $10,000 a year for the next 40 years.1. What would be the total amount of these additional
Which Job? Are You Sure?“Wow, you mean you have three job offers? How did that happen?”“I’m not quite sure, Joan,” responded Alexia. “I guess I just carefully prepared for my job
Many qualified job seekers are rejected before being seen in person.An applicant tracking system (ATS) screens résumés with software to collect, sort, scan, and rank prospective employees. An ATS
A nontaxable employee benefit has a greater value than the stated amount. What would be the tax-equivalent value of a nontaxable employee benefit of $392? Assume a 30 percent tax rate.
Luke Anderson is earning $52,000 a year in a city located in the Midwest. He is interviewing for a position in a city with a cost of living 12 percent higher than where he currently lives. What is
During a job interview, Pam Thompson is offered a salary of $32,000. The company gives annual raises of 3 percent. What would be Pam’s salary during her fifth year on the job?
Helen Ming receives a travel allowance of $180 each week from her company for time away from home. If this allowance is taxable and she has a 24 percent income tax rate, what amount will she have to
Joshua Kelly estimates that taking some classes would result in earning $4,200 more a year for the next 30 years. Based on an annual interest rate of 4 percent, calculate the future value of these
The Hamilton household has $145,000 in assets and $63,000 in liabilities. What is the family’s net worth?
Based on these items, what is the total of the (a) liquid assets and (b) current liabilities?1. Checking account balance, $860 2. Retirement account balance, $57,000 3. Credit card balance,
While a written budget provides a tangible experience, many people use apps to guide their spending. In recent years, the most popular budget apps included YNAB, Mint, Personal Capital, EveryDollar,
Aiko Sasaki budgeted $210 for food for the month of July. She spent $227 on food during July. Does she have a budget surplus or a deficit, and what amount?
Based on the following data, compute the total assets, total liabilities, and net worth.1. Liquid assets, $4,6702. Investment assets, $26,9103. Current liabilities, $2,6704. Household assets,
Use the following items to prepare a balance sheet and a cash flow statement. Determine the total assets, total liabilities, net worth, total cash inflows, and total cash outflows.1. Rent for the
Computing Balance Sheet Amounts. For each of the following situations, compute the missing amount.1. Assets $48,000; liabilities $12,800; net worth $_______.2. Assets $78,780; liabilities $_______;
Bill and Sally Kaplan have an annual spending plan that amounts to $39,500. If inflation is 3 percent a year for the next three years, what amount will the Kaplans need for their living expenses
You want to establish a savings fund from which a community organization could draw $1,000 a year for 20 years. If the account earns 2 percent, what amount would you have to deposit now to achieve
Brenda plans to reduce her spending by $80 a month. Calculate the future value of this increase in savings over the next 10 years. (Assume an annual deposit to her savings account and an annual
Kara Delaney received a $3,000 gift for graduation from a relative. If she deposits the entire amount in an account paying 3 percent, what will be the value of this gift in 15 years?
A person had $3,645 withheld for federal income taxes and had a tax liability of $3,400. Would there be a refund or an additional amount due? For what amount?
Ross Martin arrived at the following tax information:1. Gross salary, $56,145 2. Interest earnings, $205 3. Dividend income, $65 4. Standard deduction, $12,550 5. Itemized deductions, $11,250 6.
Understanding the tax implications of various financial planning decisions is essential as you move through various phases of your life. It's also important to recognize that the tax treatment of
Jamie Lee Jackson, age 26, is in her last semester of college and is waiting for graduation day, just around the corner! It is the time of year again when Jamie Lee must file her annual federal
Based on the following information, what is the amount of taxable income?Gross salary $64,155 Interest earnings $50 Dividend income $155 Standard deduction $12,550 Itemized deductions $10,200
If Lola Harper had the following itemized deductions, should she use Schedule A or the standard deduction? The standard deduction for her tax situation is $12,550.1. Donations to church and other
Imari Brown arrived at the following tax information:1. Gross salary, $36,1452. Additional small business income, $10,0003. Interest earnings, $2054. Dividend income, $655. Standard deduction,
What would be the average tax rate for a person who paid taxes of $4,584 on a taxable income of $41,670?
Based on the following data, would Ann and Carl Wilton receive a refund or owe additional taxes?Adjusted gross income: $42,686Standard deduction: $25,100Child care tax credit: $100Federal income tax
Each year, the Internal Revenue Service adjusts the value of the standard deductions based on inflation (and rounds to the nearest $50). In a recent year, if the deduction was worth $12,550 and
If 400,000 people each receive an average refund of $2,450, based on an interest rate of 3 percent, what would be the lost annual income from savings on those refunds?
Would you prefer a fully taxable investment earning 8.1 percent or a taxexempt investment earning 6.1 percent? (Assume a 24 percent tax rate.) Why?
On December 30, you decide to make a $2,500 charitable donation. If you are in the 22 percent tax bracket and you expect to itemize your deductions, how much will you save in taxes for the current
If a person in the 32 percent tax bracket makes a deposit of $6,000 to a taxdeferred retirement account, what amount would be saved on current taxes?
What would be the annual percentage yield (APY) for a savings account that earned $174 on a balance of $3,250 over the past 365 days?
If a person has ATM fees each month of $16 for 7 years, what would be the total cost of those banking fees?
For many transactions, peer-to-peer, or person-to-person (P2P) payment apps have replaced cash and checks to send money to friends and family. These services allow quick transfer of funds to others,
If you earned a 4.2 percent return on your savings, with a 15 percent tax rate, what is the after-tax rate of return?
A payday loan company charges 4.25 percent interest for a two-week period. What is the annual interest rate?
Jamie Lee Jackson, age 26, is in her last semester of college and is anxiously awaiting graduation. She still works part time as a bakery clerk, has been sticking to her budget, and is on track to
The current approximate value of Joshua’s home is about $260,000.He still has a $150,000 balance on his mortgage. His bank has agreed to let him borrow 80 percent of the value of his home. What is
A few years ago, Michael purchased a home for $200,000.Today the home is worth $300,000. His remaining mortgage balance is $100,000. Assuming Michael can borrow up to 80 percent of the market value
Are you interested in a career that protects consumers from credit card scammers and to ensure that Federal Consumer Protection Laws are obeyed? Then you may want to explore the Consumer Financial
Audra has a monthly net income of $3,000. She has a house payment of $1,000 per month, a car loan with payments of $600 per month, a Visa card with payments of $100 per month, and a credit card with
Identity theft is the fastest-growing financial crime. One of the first things the FBI discovered about the September 11 hijackers was that as many as half a dozen were using credit cards and
Hannah has determined that her net worth is $120,000. She has also determined that the face value of her mortgage is $260,000. She has determined that the face value of the rest of her debt is
Drew’s monthly net income is $4,000. What is the maximum he should use on debt payments?
The disposable income from your part-time job in 2021 was $12,000. In 2020, you borrowed $500 at 18 percent interest. You repaid your loan with interest in 2021. How much would you have available for
In the example of Problem 10, what percentage does Carl spend on his home?Problem 10Fred has had a student loan, two auto loans, and three credit cards. He has always made timely payments on all
In the example of Problem 10, what percentage does Carl spend on his car payment?Problem 10Fred has had a student loan, two auto loans, and three credit cards. He has always made timely payments on
Your bank card has an APR of 18 percent and there is a 2 percent fee for cash advances. The bank starts charging you interest on cash advances immediately. You get a cash advance of $600 on the first
As explained at the beginning of this chapter, credit costs money; therefore, you must conduct a cost/benefit analysis before making any major purchase. While most people consider credit costs,
You borrowed $1,000 at the stated interest rate of 8 percent. You pay off the loan in one lump sum at the end of the year. What is the approximate annual percentage rate?
If Dave paid the $500 in 12 equal monthly payments, what was the APR?
Jamie Lee Jackson, age 27, full-time student and part-time bakery employee, is busy setting up her new home. Her budget is a little tight now as she made the decision to move in to a place of her
An item bought on credit with a $60 down payment, and monthly payments of $70 for 36 months, would have a total cost of what amount?
Consumer Reports has been published by Consumers Union since 1936 with information on product safety, food, health care, and financial services. Over 100 experts work in 40 labs to test, analyze,
Using online research, Mackenzie enters the auto “showroom.” In the past few months she had realized that the repair costs for her 11- year-old car were increasing. She thought it was time to
A food package with 32 ounces costing $1.76 would have a unit cost of what amount?
Angela Simpson is considering the purchase of a home entertainment center.The product attributes she plans to consider and the weights she gives to them are as follows:Angela rated the brands as
If Eric Sanchez saves $60 a month by using coupons and doing comparison shopping, (a) What is the amount for a year? (b) What would be the future value of this annual amount over 10 years, assuming
Calculate the unit price of each of the following items. Item Motor oil Cereal Price Size Unit Price $1.95 2.5 quarts cents/quart 2.17 15 ounces cents/ounce Canned fruit 0.89 13
Pierre Martina is comparing the cost of credit to the cash price of an item. If Pierre makes a $70 down payment and pays $34 a month for 24 months, how much more will that amount be than the cash
Based on the following, calculate the costs of buying and of leasing a motor vehicle. Table Summary: The left half of this table covers purchase costs and consists of 2 columns. The right half of
What would be the total vehicle cost in each of these situations?Vehicle 1: A down payment of $3,500 with 48 monthly payments of $312.Vehicle 2: A down payment of $2,700 with 60 monthly payments of
Based on the following data, would you recommend buying or renting?Assume an after-tax savings interest rate of 6 percent and a tax rate of 28 percent. Table Summary: Under "rental costs" there are 3
If you’re uncertain where to live over the next three to five years, you should probably rent; otherwise, you might buy a home. To determine if you can afford to buy, estimate monthly housing costs
What is the total amount of a 30-year mortgage with monthly payments of $850?
As their apartment rent increased each year, Zoe and Luis Martinez started thinking about buying a home. For a slightly higher amount each month, they could become homeowners. However, their student
According to the Insurance Information Institute, employment of insurance brokers and sales agents is expected to grow 9 percent by the year 2024. Careers such as actuary and underwriter are
A person with homeowner’s insurance incurs roof damage of $17,000. The policy has a $500 deductible. What amount would the insurance pay for the claim?
“Have you been down in the basement?” Nathan asked his wife, Erin, as he entered their apartment.“No, what’s up?” responded Erin.“It’s flooded because of all that rain we got last
A driver lost control of the vehicle, hit a parked car, and damaged a storefront. The damage to the parked car was $4,300, and the damage to the store was $15,400. If the driver has 50/100/15 vehicle
In Problem 2, what if the driver had 50/100/20 vehicle insurance coverage? What amount will the insurance company pay? Is the driver responsible for any of the damages?Problem 2A driver lost control
Homeowner has a replacement cost policy from an insurance company. What it would cost the company to replace homeowner's personal belongings that originally cost $50,000?The replacement cost for
Eric and Susan just purchased their first home, which cost $130,000. They purchased a homeowner’s policy to insure the home for $120,000 and personal property for $75,000. They declined any
Eric’s Ford Mustang and Susan’s Toyota Prius are insured with the same insurance agent.They have 50/100/15 vehicle insurance coverage. The very week of the windstorm, Susan had an accident. She
The MacDonald family has health insurance coverage that pays 75 percent of out-of-hospital expenses after a $1,000 deductible per person. Mrs. MacDonald incurred doctor and prescription medication
Eugenio Costa, 65, received a 127-page booklet from Uncle Sam called Medicare and You 2021. It doesn’t have much of a plot, but it might be the most important reading he does this year.For seniors
Under Rose’s PPO, emergency room care at a network hospital is 80 percent covered after the member has met a $1,000 annual deductible. Assume that Rose went to a hospital within her PPO network and
Gene, an assembly line worker at an automobile manufacturing plant, has take-home pay of $900 a week. He is injured in an accident that kept him off work for 18 weeks. His disability insurance
Using Exhibit 12-2, determine the life expectancy of a 40-year-old male. Exhibit 12-2 Life expectancy tables, all races, 2018 This table helps insurance companies determine insurance premiums. Use

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