Questions and Answers of Focus On Personal Finance

You are the wage earner in a “typical family” with a $58,000 gross annual income. Use the easy method to determine how much insurance you should carry.
You and your spouse are in good health and have reasonably secure careers. Each of you makes about $55,000 annually. You own a home with a mortgage of $120,000, and you owe $15,000 on car loans,
Mark and Parveen are the parents of three young children. Mark is a store manager in a local supermarket. His gross salary is $75,000 per year. Parveen is a full-time stay-at-home mom. Use the easy
You are a dual-income, no-kids family. You and your spouse have the following debts (total): mortgage, $200,000; auto loan, $10,000; credit card balance, $4,000; other debts, $10,000. Further, you
Use the information in the Figure It Out! box earlier in the chapter to complete the following table. Annual Deposit $3,000 $3,000 $3,000 $3,000 Rate of Return 2% 8% 3% 9% Number of
Using the “nonworking” spouse method, what should be the life insurance needs for a family whose youngest child is 10 years old?
Sophia purchased a variable annuity contract with a purchase payment of $25,000. Surrender charges begin with 7 percent in the first year and decline by 1 percent each year. In addition, Sophia can
Assume you are in the 24 percent tax bracket and purchase a municipal bond with a yield of 2.90 percent. Use the formula presented in this chapter to calculate the taxable equivalent yield for this
Three years ago, you purchased a corporate bond that pays 4.30 percent. The purchase price was $1,000. What is the annual dollar amount of interest that you receive from your bond investment?
Assume you are in the 35 percent tax bracket and purchase a municipal bond with a yield of 3.20 percent. Use the formula presented in this chapter to calculate the taxable equivalent yield for this
Five years ago, you purchased seven corporate bonds that each pay 3.84 percent annual interest. Each bond has a face value of $1,000. How much interest do you earn on the seven bonds each year?
Assume that you purchased a $1,000 convertible corporate bond. Also assume the bond can be converted to 18.5 shares of the firm’s stock. What is the dollar value that the stock must reach before
Five years ago, you purchased a $1,000 par value corporate bond with an interest rate of 3.6 percent. Today comparable bonds are paying 4.2 percent. (LO11.5)a. What is the approximate dollar price
In 2009, you purchased a $1,000 par value corporate bond with an interest rate of 4 percent. Today, comparable bonds are paying 3.30 percent.a. What is the approximate dollar price for which you
If a person in a 32 percent tax bracket makes a deposit of $5,000 to a tax-deferred retirement account, what amount would be saved on current taxes?
On December 30, you make a $3,000 charitable donation.a. If you are in the 24 percent tax bracket, how much will you save in taxes for the current year?b. If you deposit that tax savings in a savings
Reginald Sims deposits $5,500 each year in a tax-deferred retirement account. If he is in a 22 percent tax bracket, by what amount would his tax be reduced over a 20-year time period?
Would you prefer a fully taxable investment earning 10 percent or a tax-exempt investment earning 8.25 percent? (Assume a 24 percent tax rate.) Why?
Julia Sims has $30,000 of adjusted gross income and $5,000 of medical expenses. She expects to itemize her tax deductions this year. The most recent tax year has a medical expenses floor of 10
Allison has returned to school after five years out of the work force. She is taking one course at the local university for a cost of $1,500. To minimize her taxes, should she take a tuition and fees
If Samantha Jones had the following itemized deductions, should she use Schedule A or the standard deduction? The standard deduction for her tax situation is $12,400. Donations to church and other
Using the tax table in Exhibit 3–5, determine the amount of taxes for the followingsituations:a. A head of household with taxable income of $89,525.b. A single person with taxable income of
Noor Patel has had a busy year! She decided to take a cross-country adventure. Along the way, she won a new car on The Price Is Right (valued at $15,500) and $500 on a scratch-off lottery ticket (the
What would be the average tax rate for a person who paid taxes of $4,706 on taxable income of $40,780?
If you borrow $8,000 with a 5 percent interest rate to be repaid in five equal payments at the end of the next five years, what would be the amount of each payment?
Tran Lee plans to set aside $2,600 a year for the next seven years, earning 3 percent. What would be the future value of this savings amount?
Carla Lopez deposits $2,800 a year into her retirement account. If these funds have average earnings of 7 percent over the 40 years until her retirement, what will be the value of her retirement
Pete Morton is planning to go to graduate school in a program of study that will take three years. Pete wants to have $8,000 available each year for various school and living expenses. If he earns 3
If you desire to have $12,000 for a down payment for a house in five years, what amount would you need to deposit today? Assume that your money will earn 4 percent.
Using the following balance sheet items and amounts, calculate the total liquid assets and total current liabilities.a. Total liquid assets $b. Total current liabilities $ Money market account,
Using a financial calculator, Excel, or the time value of money tables in the Chapter 1 Appendix, calculate the following:a. The future value of $550 six years from now at 7 percent.b. The future
Use the following items to determine the total assets, total liabilities, net worth, total cash inflows, and total cash outflows.a. Total assets $b. Total liabilities $c. Net worth $d. Total cash
Based on the following financial data, calculate the ratios requested.a. Debt ratiob. Current ratioc. Debt-payments ratiod. Savings ratio Liabilities, $7,800 Liquid assets, $4,600 Monthly credit
Brenda plans to reduce her spending by $50 a month. What would be the future value of this reduced spending over the next 10 years? (Assume an annual deposit to her savings account and an annual
Kara George received a $5,000 gift for graduation from her uncle. If she deposits this in an account paying 3 percent, what will be the value of this gift in 12 years?
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
What would be the yearly earnings for a person with $9,000 in savings at an annual interest rate of 1.5 percent?

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