PFIN 6th Edition Randall Billingsley , Lawrence J. Gitman, Michael D. Joehnk - Solutions

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Discuss the importance and basic principles of property insurance, including types of exposure, indemnity, and co-insurance. T=8
Calculating need for disability income insurance. Use Worksheet 9.2. Do you need disability income insurance? Calculate your need using Worksheet 9.2. Discuss how you’d go about purchasing this coverage. P=78
Calculating need for disability income insurance. Use Worksheet 9.2. Lorenzo Ricci, a 38-year-old computer programmer, earns $96,000 a year. His monthly takehome pay is $4,800. His wife, Siena, works part-time at their children’s elementary school but receives no benefits. Under state law,
Pros and cons of long-term care insurance. Discuss the pros and cons of long-term-care insurance. Does it make sense for anyone in your family right now?Why or why not? What factors might change this assessment in the future? P=78
Evaluating health care coverage.Edward Allen was a self-employed window washer earning approximately $700 per week. One day, while cleaning windows on the eighth floor of the Second National Bank Building, he tripped and fell from the scaffolding to the pavement below.He sustained multiple severe
Out-of-pocket health care insurance costs. Samuel Nguyen was seriously injured in a skiing 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, $4,300 in physician’s fees (including time in the hospital and
Choosing a health insurance plan.Harriet and Jake Sanders have two children, a six-year-old and a five-month old. Their younger child, Alex, was born with a congenital heart defect that will require several major surgeries in the next few years to correct fully. Jake is employed as a salesperson
Comparing health insurance policies.Use Worksheet 9,1. Lexi Thomas, a recent college graduate, has decided to accept a job offer from a nonprofit organization.She’ll earn $44,000 a year but will receive no employee health benefits. Lexi estimates that her monthly living expenses will be about
Evaluating current health insurance.Assess your current health insurance situation. What does your policy cover?What is excluded? Are there any gaps that you think need to be filled? Are there any risks in your current lifestyle or situation that might make additional coverage necessary? If you
Discuss the features of disability income insurance and how to determine your need for it? P=78
Assess the need for and features of long-term-care insurance. P=78
Explain the basic types of medical expenses covered by the policy provisions of health insurance plans. P=78
Analyze your own health insurance needs and explain how to shop for appropriate coverage. P=78
Differentiate among the major types of health insurance plans, and identify major private and public health insurance providers and their programs. P=78
Discuss why having adequate health insurance is important, and identify the factors contributing to the growing cost of health insurance. P=78
Deciding whether to pay cash or finance a purchase.Use Worksheet 7.2. Matilda Edwards wants to buy a home entertainment center.Complete with a big-screen TV, DVD, and sound system, the unit would cost $4,500. Matilda has over $15,000 in a money market fund, so she can easily afford to pay cash for
Comparing payments and APRs of financing alternatives. Because of a job change, Finn McBryde has just relocated to the southeastern United States. He sold his furniture before he moved, so he’s now shopping for new furnishings. At a local furniture store, he’s found an assortment of couches,
Calculating and comparing add-on and simple interest loans. Eli Nelson is borrowing $10,000 for five 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 Eli pay on the loan if it is held for the full five-year
Calculating payments, interest, and APR on auto loan. After careful comparison shopping, Isabella Green decides to buy a new Toyota Camry. With some options added, the car has a price of $23,558—including plates and taxes.Because she can’t afford to pay cash for the car, she will use some
Calculating interest and APR of installment loan. Assuming that interest is the only finance charge, how much interest would be paid on a $5,000 installment loan to be repaid in 36 monthly installments of $166.10? What is the APR on this loan?
Calculating monthly installment loan payments. Using the simple interest method, find the monthly payments on a $3,000 installment loan if the funds are borrowed for 24 months at an annual interest rate of 6 percent.
Calculating the APR on simple interest and discount loans. Find the finance charges on a 6.5 percent, 18-month, single-payment loan when interest is computed using the simple interest method. Find the finance charges on the same loan when interest is computed using the discount method. Determine
Calculating single-payment loan amount due at maturity. Stanley Price plans to borrow$8,000 for five years. The loan will be repaid with a single payment after five years, and the interest on the loan will be computed using the simple interest method at an annual rate of 6 percent.How much will
Evaluating financing packages. Assume that you’ve been shopping for a new car and intend to finance part of it through an installment loan.The car you’re looking for has a sticker price of$18,000. Custom Vehicles has offered to sell it to you for $3,000 down and finance the balance with a loan
Calculating debt safety ratio. Use Worksheet 7.1. Every six months, Leo Perez 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 making $85 monthly payments on a personal loan
Student loan options. Scarlett Hill, a sophomore at State College, is running out of money.Wanting to continue her education, Scarlett is considering a student loan. Explain her options.How can she best minimize her borrowing costs and maximize her flexibility?
Determine the costs of installment loans and analyze whether it is better to pay cash or to take out a loan. L01
Evaluate the benefits of an installment loan. L01
Describe the features of, and calculate the finance charges on, single-payment loans. L01
Choose the best loans by comparing finance charges, maturity, collateral, and other loan terms. L01
Identify the various sources of consumer loans. L01
Know when to use consumer loans and be able to differentiate between the major types. L01
Inflation and interest rates. Jessica Adams 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 long-term effects of inflation. Help her by answering the following related questions:a. Explain the
Funding a retirement goal. Austin Miller 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 upon retirement in 20 years, Austin plans to invest $800,000 in a fund that earns 4 percent, what is the maximum
Calculating present and future values. Use future or present value techniques to solve the following problems.a. If you inherited $45,000 today and invested all of it in a security that paid a 7 percent rate of return, how much would you have in 25 years?b. If the average new home costs $275,000
Preparing cash budget. Theo and Sophia Martinez are preparing their 2021 cash budget. Help the Martinez family reconcile the following differences, giving reasons to support your answers.a. Their only source of income is Theo’s salary, which amounts to $5,000 per month before taxes. Sophia wants
Preparing financial statements. Hugo Garcia is preparing his balance sheet and income and expense statement for the year ending December 31, 2020. He is having difficulty classifying six items and sks for your help. Which, if any, of the following transactions are assets, liabilities, income, or
Financial plans vs. statements. Describe and distinguish financial plans and statements. K47
Understand the relationship between inflation and nominal interest rates and calculate the real interest rate. P=58
Apply time value of money concepts to put a monetary value on financial goals. P-52
Construct a cash budget and use it to monitor and control spending. P-58
Develop a good record-keeping system and use ratios to evaluate personal financial statements. LO1
Generate a personal income and expense statement. LO1
Prepare a personal balance sheet. LO1
SH O RT-TE RM IN E STM E N TS AN D IN FLATIO N.Describe some of the short-term investments that can be used to manage your cash resources. What factors would you focus on if you were concerned that inflation will increase significantly in the future? lo1
DE TE RM IN IN G TH E RIGH T AM OUN T O F SH O RTTE RM , LIQU ID IN E STM E N TS. Leo and Ava Bryant together earn approximately $92,000 a year after taxes. Through an inheritance and some wise investing, they also have an investment portfolio with a value of almost$200,000.a. How much of their
CALCU LATIN G IN TE RE ST E ARN E D AN D FU TURE ALU E O F SA IN G S ACCOUN T. If you put $6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint:Use the future value formula.) How much interest will you earn during
CH E C IN G ACCOUN T RE CO N CILIATIO N. Use Worksheet 4.1. Carlos Alvarez has a an interest-paying (NOW) checking account at the First State Bank. His checkbook ledger lists the following checks:Check Number Amount 654 $206.05 658 55.22 662 103.00 668 99.00 670 6.10 671 50.25 672 24.90 673 32.45
CALCU LATIN G TH E N E T CO STS O F CH E C IN G ACCOUN TS. Determine the annual net cost of these checking accounts:a. Monthly fee $4, check-processing fee of 20 cents, average of 23 checks written per monthb. Annual interest of 1.5 percent paid if balance exceeds $750, $8 monthly fee if account
EXP O SURE FROM STO LE N ATM CARD. Suppose that someone stole your ATM card and withdrew $1,000 from your checking account.How much money could you lose (according to federal legislation) if you reported the stolen card to the bank: (a) the day the card was stolen, (b) 6 days after the theft, (c)
CH O O S IN G A N EW B AN . You’re getting married and believe your present bank is not a good fit. Discuss how you should go about choosing a new bank and opening an account. Consider the factors that are important to you in selecting a bank—such as the type and ownership of new accounts and
COM P ARIN G B AN S ON LIN E. What type of bank serves your needs best? Visit the Internet sites of the following institutions and prepare a chart comparing the services offered, such as traditional and online banking, investment services, and personal financial advice. Which one would you choose
AD AP TIN G TO A LOW IN TE RE ST RATE E N IRON M E N T. A retired couple has expressed concern about the really low interest rates they’re earning on their savings. They’ve been approached by an adviser who says he has a “sure-fire” way to get them higher returns.What would you tell this
Develop a cash management strategy that incorporates a variety of savings plans? lo1
Calculate the interest earned on your money using compound interest and future value techniques. lo1
Open and use a checking account. lo1
Select the checking, savings, electronic banking, and other bank services that meet your needs. lo1
Describe today’s financial services marketplace, both depository and nondepository financial institutions. lo1
Understand the role of cash management in the personal financial planning process. lo1
FUN D IN G A RE TIRE M E N T GO AL. Owen Freeman 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 upon retirement in 20 years, Owen plans to invest $800,000 in a fund that earns 4 percent, what is the
CALCU LATIN G P RE SE N T AN D FU TURE ALU E S. Use future or present value techniques to solve the following problems.a. If you inherited $45,000 today and invested all of it in a security that paid a 7 percent rate of return, how much would you have in 25 years?b. If the average new home costs
PRE P ARIN G CASH B U D G E T. Lucas and Emma Mendoza are preparing their 2018 cash budget.Help the Mendozas reconcile the following differences, giving reasons to support your answersa. Their only source of income is Lucas’ salary, which amounts to $5,000 a month before taxes. Emma wants to show
PRE P ARIN G P E RSO N AL IN CO M E AN D E X P E N SE STATE M E N T. Use Worksheet 2.2. Ivy and Jack Davis are about to construct their income and expense statement for the year ending December 31, 2017. Ivy works full time while Jack is finishing up graduate school. They have put together the
PRE PA RIN G PE RSO N AL B ALAN CE SH E E T. US E WO R SH E E T 2.1. Ella Campbell’s banker has asked her to submit a personal balance sheet as of June 30, 2017, in support of an application for a $6,000 home improvement loan.She comes to you for help in preparing it. So far, she has made the
PRE PA RIN G FIN AN CIAL S TATE M E N TS. Daniel Hernandez is preparing his balance sheet and income and expense statement for the year ending December 31, 2017. He is having difficulty classifying six items and asks for your help. Which, if any, of the following transactions are assets,
Apply time value of money concepts to put a monetary value on financial goals. L01
Construct a cash budget and use it to monitor and control spending. L01
Develop a good record-keeping system and use ratios to evaluate personal financial statements. L01
Generate a personal income and expense statement. L01
Prepare a personal balance sheet. L01
Understand the relationship between financial plans and statements. L01
DE CID IN G W H E TH E R TO P AY CASH O R FIN AN CE A P URCH ASE. Use Worksheet 7.2. Alice Morgan wants to buy a home entertainment center. Complete with a big-screen TV, DVD, and sound system, the unit would cost $4,500.Alice has over $15,000 in a money market fund, so she can easily afford to pay
COMPARING PAYMENTS AND APRS OF FINANCING ALTERNATI ES. Because of a job change, Harry Williamson has just relocated to the southeastern United States. He sold his furniture before he moved, so he's now shopping for new furnishings. At a local furniture store, he's found an assortment of couches,
CAICULATING AND COM PARING ADD-ON AND SIM PIE INTEREST LOANS. Ed Pierce is borrowing $10,000 for five 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 Ed pay on the loan if it is held for the full five-year
CALCULATING PAYMENTS, INTEREST, AND APRON AUTO LOAN. After careful comparison shopping. Leah Cunningham decides to buy a new Toyota Camry. With some options added, the car has a price of $23,558-including plates and taxes. Because she can't afford to pay cash for the car, she will use some savings
CALCULATING MONTHLY INSTALLMENT LOAN PAYMENTS. Using the simple interest method, find the monthly payments on a $3,000 installment loan if the funds are borrowed for 24 months at an annual interest rate of 6 percent. 7. CALCULATING INTEREST AND APR OF INSTALMENT 10 AN. Assuming that interest is the
CALCULATING THE APR ON SIM PIE INTEREST AND DISCOUNT IDANS. Find the finance charges on a 6.5 percent, 18-month, single-payment loan when interest is computed using the simple interest method. Find the finance charges on the same loan when interest is computed using the discount method. Determine
CALCULATING SINGLE-PAYMENT LOAN AMOUNT DUE AT MATURITY. Asher Ingram plans to borrow $8,000 for five years. The loan will be repaid with a single payment after five years, and the interest on the loan will be computed using the simple interest method at an annual rate of 6 percent. How much will
E AWATING FINANCING PAC AGES. Assume that you've been shopping for a new car and intend to finance part of it through an installment loan. The car you're looking for has a sticker price of $18,000. Quality Vehicles has offered to sell it to you for $3,000 down and finance the balance with a loan
CALCULATING DEBT SAFETY RATIO. Use Worksheet 7.1. Every six months, Samuel Gonzalez 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 making $85 monthly payments on a
STUDENT LOAN OPTIONS. Eliza Mitchell, a sopho- more at State College, is running out of money. Wanting to continue her education, Eliza is con- sidering a student loan. Explain her options. How can she best minimize her borrowing costs and maximize her flexibility? LO1
Determine the costs of installment loans and analyze whether it is better to pay cash or to take out a loan. LO1
Evaluate the benefits of an installment loan. LO1
Describe the features of, and calculate the finance charges on, single-payment loans. LO1
Choose the best loans by comparing finance charges, maturity, collateral, and other loan terms. LO1
Identify the various sources of consumer loans. LO1
Know when to use consumer loans and be able to differentiate between the major types. LO1
FIXED S. ARIABLE ANNUITIES. What are the main differences between fixed and variable annuities? Which type is more appropriate for someone who is 60 years old and close to retirement?LO1
COM PARING ARIABLE ANNUITIES AND MUTUAL FUNDS. Explain how buying a variable annuity is much like investing in a mutual fund. Do you, as a buyer, have any control over the amount of investment risk to which you're exposed in a variable annuity contract? Explain.LO1
DECIDING WHETHER TO CON ERT A TRADITIONAL IRA TO A ROTH IRA. Explain the circumstances in which it make sense to convert a traditional IRA to a Roth IRA.LO1
AFTER-TAX COST OF 401( ) CONTRIBUTION. Ramon Flores is an operations manager for a large manufacturer. He earned $68,500 in 2016 and plans to contribute the maximum allowed to the firm's 401(k) plan. Assuming that Ramon is in the 25 percent tax bracket, calculate his taxable income and the amount
COMPARING RETIREMENT PLANS. Alexa Rollins has just graduated from college and is consid- ering job offers from two companies. Although the salary and insurance benefits are similar, the retirement programs are not. One firm offers a 401(k) plan that matches employee contribu- tions with 25 cents
RETIREMENT PLANNING. At what age would you like to retire? Describe the type of lifestyle you envision-where you want to live, whether you want to work part-time, and so on. Discuss the steps you think you should take to realize this goal.LO1
A E RAGE SO CIAL SE CURITY B E N E FITS AN D TAXE S.Use Exhibit 14.2 to estimate the average Social Security benefits for a retired couple. Assume that one spouse has a part-time job that pays $24,000 a year, and that this person also receives another $47,000 a year from a company pension. Based on
CALCU LATIN G AN N UAL IN E STM E N T TO M E E T RE -TIRE M E N T GO AL. Use Worksheet 14.1 to help Derek and Sally Archer who’d like to retire while they’re still relatively young—in about 20 years.Both have promising careers, and both make good money. As a result, they’re willing to put
CALCULATING AMOUNT A AILABLE AT RETIREMENT. Jocelyn Booker, a 25-year-old personal loan of- ficer at Second National Bank, understands the importance of starting early when it comes to saving for retirement. She has committed $3,000 per year for her retirement fund and assumes that she'll retire at
RETIREMENT PLANNING PITFAUS. Explain the three most common pitfalls in retirement planning.LO1
DIFFE RE N T WAY S TO IN E ST IN RE AL E STATE. Assume you’ve just inherited $100,000 and wish to use all or part of it to make a real estate investment.a. Would you invest directly in real estate, or indirectly through something like a REIT?Explain.b. Assuming that you decided to invest
IN E STIN G IN RE S ID E N TIAL IN CO M E -P RO D U CIN G P RO P E RTY. Hope Sheppard is thinking about investing in residential income-producing property that she can purchase for $200,000. Hope can either pay cash for the full amount of the property or put up $50,000 of her own money and borrow
CALCU LATIN G M U TUAL FUN D AP P ROX IM ATE RATE O F RE TURN. A year ago, the Stellar Fund was being quoted at an NAV of $21.50 and an offer price of $23.35; today, it’s being quoted at $23.04(NAV) and $25.04 (offer). Use the approximate yield formula or a financial calculator to find the rate

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PFIN 6th Edition Randall Billingsley , Lawrence J. Gitman, Michael D. Joehnk - Solutions

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