Questions and Answers of Personal Financial Planning

Choosing a REIT. Choose two REITS from a list available at https://www.reit.com/dataresearch/reit-indexes/reits-by-ticker-symbol. Using information you can find by clicking on the ticker symbol on
What are the most common reasons for buying mutual funds and ETFs?
Olivia Stephens, a 25-year-old personal loan officer at Third National Bank, understands the importance of starting early when it comes to saving for retirement. She has designated $3,000 per year
Patricia Little and Brandi Wheeler are neighbors in Reston, Virginia. Patricia works as a software engineer for Progressive Apps Corporation, while Brandi works as an executive for an industrial
Felicia Garza is 57 years old and has been widowed for 13 years—in addition to raising her two children, the youngest of whom is now finishing college. After being forced to go back to work in her
Evaluating loan request. Justin Moss recently graduated from college and wants to borrow $50,000 to start a business, which he believes will produce a cash flow of at least $10,000 per year. As a
Sadie Richardson’s banker has asked her to submit a personal balance sheet as of June 30, 2020, in support of an application for a $6,000 home improvement loan. She comes to you for help in
Preparing an Individual’s Tax Form. Caleb Lee graduated from college in 2018 and began work as a systems analyst in July of that year. He is preparing to file his income tax return for 2018, and
Every 6 months, Sean Ma takes an inventory of the consumer debts that he has outstanding. His latest tally shows that he still owes $4,000 on a home improvement loan (monthly payments of $125); he is
Alexa Rose is a sophomore at State College and is running out of money. Wanting to continue her education, Alexa is considering a student loan. Explain her options. How can she minimize her borrowing
At age 19, Katie Hicks is in the middle of her second year of studies at a community college in Atlanta. She has done well in her course work; majoring in pre-business studies, she currently has a
List and briefly discuss the five major reasons for borrowing money through a consumer loan.1. Auto loans: The loan is secured with the auto, meaning that the vehicle serves as collateral for the
Cody Andrews, a 27-year-old bachelor living in Richmond, Virginia, has been a high-school teacher for 5 years. For the past four months, he’s been thinking about buying a Subaru Outback, but he
Chase Boyd plans to borrow $8,000 for 5 years. The loan will be repaid with a single payment after 5 years, and the interest on the loan will be computed using the simple interest method at an annual
Define and differentiate between:(a) Fixed- and variable-rate loans and (b) A single payment loan and an installment loan.
Compare the consumer lending activities of:(a) Consumer finance companies and (b) Sales finance companies. Describe a captive finance company.
Discuss the role in consumer lending of :(a) Credit unions and (b) Savings and loan associations. Point out any similarities or differences in their lending activities. How do they compare with
Steven Riley is borrowing $10,000 for 5 years at 7 percent. Payments, which are made on a monthly basis, are determined using the add-on method. a. How much total interest will Steven pay on the
Calculating payments, interest, and APR on auto loan. After careful comparison shopping, Noah Griffin decides to buy a new Toyota Camry. With some options added, the car has a price of
Camila Torres wants to buy a new high-end audio system for her car. The system is being sold by two dealers in town, both of whom sell the equipment for the same price of $2,000. Camila can buy the
Timothy Lawrence plans to borrow $5,000 and to repay it in 36 monthly installments. This loan is being made at an annual add-on interest rate of 7.5 percent.a. Calculate the finance charge on this
Deciding whether to pay cash or finance a purchase. Use Worksheet 7.2. Mariah Lane wants to buy a home entertainment center. Complete with a big-screen TV and sound system, the unit would cost
Li Huang, a 38-year-old widowed mother of three children (ages 12, 10, and 4), works as an analyst for an advertising firm. Although she’s covered by a group life insurance policy at work, she
Use Worksheet 8.1. Given your current personal financial situation, do you feel you need life insurance coverage? Why or why not? Use Worksheet 8.1 to confirm your answer and calculate how much
Grayson and Aubrey Reed are a two-income couple in their early 30s. They have two children, ages 6 and 3. Grayson’s monthly take-home pay is $3,600, and Aubrey’s is $4,200. The Reeds feel that,
Michael Edwards, 43, is a recently divorced father of two children, ages 9 and 7. He currently earns $95,000 a year as an operations manager for a utility company. The divorce settlement requires him
Comparing payments and APRs of financing alternatives. Because of a job change, Seth Armstrong has just relocated to the southeastern United States. He sold his furniture before he moved, so he’s
Aurora Bell is a 72-year-old widow who has recently been diagnosed with Alzheimer’s disease. She has limited financial assets of her own and has been living with her daughter Skylar for two years.
Appropriateness of whole life insurance. Estella and Hugo Sanchez are a dual-career couple who just had their first child. Hugo age 31, already has a group life insurance policy, but Estella’s
Asher Perkins, a 35-year-old computer programmer, earns $96,000 a year. His monthly take-home pay is $4,800. His wife, Ellie, works part-time at their children’s elementary school but receives no
Jasper Bell was a self-employed window washer earning approximately $700 per week. One day, while cleaning windows on the eighth floor of the Third National Bank Building, he tripped and fell from
Silas and Camila Sims have two children, with ages of 6 years and 5 months. Their younger child, Julian, was born with a congenital heart defect that will require several major surgeries in the next
Valeria and Matias Rivera have been married for two years and have a 1-year-old son. They live in Richmond, Virginia, where Matias works for Software Solutions. He earns $6,000 per month, of which he
Oscar Wang was seriously injured in a snowboarding accident that broke both his legs and an arm. His medical expenses included five days of hospitalization at $900 a day, $6,200 in surgical fees,
Thea Morris, a recent college graduate, has decided to accept a job offer from a nonprofit organization. She’ll earn $45,000 a year but will receive no employee health benefits. Thea estimates that
Describe these policy provisions commonly found in medical expense plans: (a) Deductibles,(b) Co-insurance, and(c) Coordination of benefits.
Describe the differences among long-term-care policies regarding:(a) Type of care.(b) Eligibility requirements, and(c) Services covered. List and discuss some other important policy provisions.
Assume that Savannah Stone had a homeowner’s insurance policy with $200,000 of coverage on the dwelling. Would a 90 percent co-insurance clause be better than an 80 percent clause in such a policy?
Levi and Riley Scott, ages 30 and 28, were recently married in Denver. Levi is an electrical engineer with Bright Solutions, a computer component design firm. Riley has a master’s degree in
Last year, Eleanor and Felix Knight bought a home with a dwelling replacement value of $350,000 and insured it (via an HO-5 policy) for $310,000. The policy reimburses for actual cash value and has a
Javier Perez is a 40-year-old loan officer at a large regional bank; he has a 16-year-old son. He has decided to use his annual bonus as a down payment on a new car. One Saturday afternoon Javier
Ivy Gordon’s home in Charleston was recently gutted in a fire. Her living and dining rooms were destroyed completely, and the damaged personal property had a replacement price of $32,000. The
Describe how the co-insurance feature works.
Use Worksheet 11.1 Ashley Olson is early in her career and is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works
Jane and Leo Daniels, both graduate students, moved into an apartment near the university. Jane wants to buy renter’s insurance, but Leo thinks that they don’t need it because their furniture
Personal automobile policy coverage. Finn Stone has a PAP with coverage of $25,000/$50,000 for bodily injury liability, $25,000 for property damage liability, $5,000 for medical payments, and a $500
Scarlett and Damon Mitchell are a high-net-worth couple. They have appropriate auto and homeowner’s insurance but are concerned that they could be sued by someone visiting or working at their home.
Dexter and Hannah Roberts recently went out for dinner on a rainy night. When the traffic unexpectedly slowed down, they were rear-ended by an inexperienced driver. Describe what steps the Roberts
Like many married couples, Morgan and Thomas Jensen are trying their best to save for two important investment objectives: (1) an education fund to put their two children through college; and (2) a
Martin Moreno is 42 years old, single, and works as a designer for a major architectural firm. He is well paid and over time has built up a sizable portfolio of investments. He considers himself an
Suppose Ryan Cunningham places an order to buy 100 shares of The Gap. Explain how the order will be processed if it’s a market order. Would it make any difference if it had been a limit order?
Elizabeth Greene wants to buy 300 shares of Google, which is selling in the market for $537.34 a share. Rather than liquidate all her savings, she decides to borrow through her broker at 5 percent a
Which of the following would offer the best return on investment? Assume that you buy $5,000 in stock in all three cases and ignore interest and transaction costs in all your calculations.a. Buy a
Given that Local Care, Inc.’s stock is currently selling for $40 a share, calculate the amount of money that Elijah Pearson will make (or lose) on each of the following transactions. Assume all
How much profit (if any) would Roberto Chavez make if he short sold 300 shares of a stock at $100 a share and the price of the stock suddenly tumbled to $70?
The following quote for The Walt Disney Company, a NYSE stock, appeared on November 8, 2019 (Friday) on Yahoo! Finance ((https://finance.yahoo.com/quote/DIS?p=DIS&.tsrc=fin-srch).The Walt Disney
Use Worksheet 11.2 to help Destiny and Robert Payne, a married couple in their late 40s, evaluate their securities portfolio, which includes these holdings.a. IBM. (NYSE; symbol IBM): 100 shares
Describe how the return on an investment is calculated.
Cora Hamilton recently graduated from college and moved to Charlotte to take a job as a market research analyst. She was pleased to be financially independent and was sure that, with her $45,000
Ashton and Melody Webb are a married couple in their mid-20s. Ashton has a good start as an electrical engineer and Melody works as a sales representative. Since their marriage four years ago, Ashton
During the Christmas break of his final year at the University of Florida (U of F), Aaron Barnes plans to put together his résumé in order to seek full-time employment as a software engineer during
Cameron Foster, a 55-year-old retail store manager earning $85,000 a year, has worked for the same company during his entire 30-year career. Cameron was recently laid off and is still unemployed 10
Hudson Ross and Camila Cox are planning to get married in six months. Both are 30 years old and have been out of college for several years. Hudson uses three credit cards and has a bank account
Brooklyn Hughes and Madison Powell, both freshmen and friends at a major university, are interested in going into a computer sciences career. While they're not just interested in the money they can
Here is a portion of Joshua Sanders’s budget record for a recent month. Fill in the blanks in columns 5 and 6.
Distinguish between long-term, intermediate, and short-term financial goals. Give examples of each.
Cooper Bryant’s investments over the past several years have not lived up to his full return expectations. He is not particularly concerned, however, because his return is only about 2 percentage
Axel Gibson is preparing his balance sheet and income and expense statement for the year ending June 30, 2020. He is having difficulty classifying six items and asks for your help. Which, if any, of
Landon and Naomi Gray are preparing their cash budget. Help the Grays reconcile the following differences, giving reasons to support your answers. a. Their only source of income is Landon’s
Over the past several years, Natalie Howard has been able to save regularly. As a result, she has $54,188 in savings and investments today. She wants to establish her own business in 5 years and
Connor Ward wishes to have $800,000 in a retirement fund 20 years from now. He can create the retirement fund by making a single lump-sum deposit today.a. If he can earn 6 percent on his investments,
Calculating Marginal Tax Rates. Amelia Hall is single and received the following items and amounts of income during 2018. Determine the marginal tax rate applicable to each item. Note that if the
Jeremiah Wood wants to set up a fund to pay for his daughter’s education. In order to pay her expenses, he will need $23,000 in four years, $24,300 in five years, $26,000 in six years, and $28,000
The Garcia family has prepared their annual cash budget for 2021. They have divided it into 12 monthly budgets. Although only 1 monthly budget balances, they have managed to balance the overall
Lucy Price has always been interested in stocks. She has decided to invest $2,000 once every year into an equity mutual fund that is expected to produce a return of 6 percent a year for the
Inflation and interest rates. Lillian Coleman is 21 years old and has just graduated from college. In considering the retirement investing options available at her new job, she is thinking about the
What is compounding? Explain the rule of 72.
Explain how inflation affects the purchasing poser of money over time. What is the Fisher equation and how does it relate nominal and real interest rates to the expected rate of inflation?
Lillian and Jackson Clark are a married couple in their early 20s living in Los Angeles. Jackson Clark earned $93,000 in 2018 from his job as a sales assistant. During the year, his employer withheld
Estimating Taxable Income, Tax Liability, and Potential Refund. Charlotte Taylor is 24 years old and single, lives in an apartment, and has no dependents. Last year, she earned $55,000 as a sales
Julian Thomas, who is single, goes to graduate school part-time and works as a waiter at the Bay Grill in San Francisco. During 2018, his gross income was $20,700 in wages and tips. He has decided to
If Isabella Rodriguez is single and in the 24 percent tax bracket, calculate the tax associated with each of the following transactions. (Use the IRS regulations for capital gains in effect in
Effect of Tax Credit versus Tax Exemption. Explain and calculate the differences resulting from a $2,000 tax credit versus a $2,000 tax deduction for a single taxpayer with $40,000 of pre-tax income.
Calculating Taxable Income for a Married Couple Filing Jointly. Emily and Luke Robinson are married and have one child. Luke is putting together some figures so that he can prepare the Robinsons’
Preparing for a Tax Audit. John and Evelyn Harris have been notified that they are being audited. What should they do to prepare for the audit?
Lian Chen is a registered nurse who earns $3,250 per month after taxes. She has been reviewing her savings strategies and current banking arrangements to determine if she should make any changes.
Vivian and Rowen Wells are college students who opened their first joint checking account at the American Bank on September 14, 2020. They’ve just received their first bank statement for the period
Nicolas Cruz has a NOW account at the Second National Bank. His checkbook ledger lists the following checks:Nicolas also made the following withdrawals and deposits at an ATM near his
Determining the right amount of short-term, liquid investments. Evan and Sara Myers together earn approximately $82,000 a year after taxes. Through an inheritance and some wise investing, they also
Define and discuss (a) Demand deposits, (b) Time deposits, (c) Interest-paying checking accounts.
Describe some of the short-term investment vehicles that can be used to manage your cash resources. What would you focus on if you were concerned that inflation will increase significantly in the
Sarah and Tyler Hudson, a dual-income couple in their late 20s, want to replace their 7-year-old car, which has 90,000 miles on it and needs some expensive repairs. After reviewing their budget, the
Alexis Martin has just graduated from college and needs to buy a car to commute to work. She estimates that she can afford to pay about $450 per month for a loan or lease and has about $2,000 in
Aramis and Danielle Bisset, both in their mid-20s, have been married for 4 years and have two preschool-age children. Ben has an accounting degree and is employed as a cost accountant at an annual
Gavin Anderson is trying to decide whether to lease or purchase a new car costing $18,000. If he leases, he’ll have to pay a $600 security deposit and monthly payments of $425 over the 36-month
Natalie Warren is in her late 20s. She is renting an apartment in the fashionable part of town for $1,500 a month. After much thought, she’s seriously considering buying a condominium for $325,000.
Kayla Thompson is married and currently renting an apartment for $725 per month and paying $275 annually for renter’s insurance. Her landlord required a $1,000 security deposit on the
Determining maximum affordable mortgage payment. Using the maximum ratios for a conventional mortgage, how big a monthly payment could the Sanchez family afford if their gross (before-tax) monthly
Rachel and Alexander Harrison need to calculate the amount that they can afford to spend on their first home. They have a combined annual income of $67,500 and have $37,000 available for a down
Jia Ma purchased a condominium 4 years ago for $180,000, paying $1,250 per month on her $162,000, 8 percent, 25-year mortgage. The current loan balance is $152,401. Recently, interest rates have

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