Questions and Answers of Personal Financial Planning

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
After graduating from college last fall, Jennifer Grant took a job as a consumer credit analyst at a local bank. From her work reviewing credit applications, she realizes that she should begin
Luis and Elena Gonzales are a newly married couple in their mid-20s. Luis is a senior at a state university and expects to graduate in the summer of 2021. Elena graduated last spring with a degree in
Evaluating debt burden. Kevin Mills has a monthly take-home pay of $3,865; he makes payments of $410 a month on his outstanding consumer credit (excluding the mortgage on his home). How would you
A year after declaring bankruptcy and moving with her daughter into a home with her sister, Molly Graham is about to get a degree in nursing. As she starts out in a new career, she also wants to
Use Worksheet 6.1. Katherine Hunt is evaluating her debt safety ratio. Her monthly take- home pay is $3,320. Each month, she pays $380 for an auto loan, $120 on a personal line of credit, $60 on a
Isaiah and Allison Burton have a home with an appraised value of $180,000 and a mortgage balance of only $90,000. Given that an S&L is willing to lend money at a loan to-value ratio of 75
Joseph Simpson, a student at State College, has an average balance of $380 on his retail charge card; if the store levies a finance charge of 21 percent per year, how much monthly interest will be
Justin Nichols recently graduated from college and is evaluating two credit cards. Card A has an annual fee of $75 and an interest rate of 9 percent. Card B has no annual fee and an interest rate of
Calculating credit card finance charge. Blake Miller recently received his monthly MasterCard bill for the period June 1–30, 2021, and wants to verify the monthly finance charge calculation, which
Camila Martinez has several credit cards, on which she is carrying a total current balance of $14,500. She is considering transferring this balance to a new card issued by a local bank. The bank
Comparing credit and debit cards. Caden Walker is trying to decide whether to apply for a credit card or a debit card. He has $8,500 in a savings account at the bank and spends his money frugally.
Credit card liability. Cheryl Lee was reviewing her credit card statement and noticed several charges that didn’t look familiar to her. Cheryl is unsure whether she should pay the bill in full and

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