Jena has been so excited about what she has learned in her personal finance management class that she has been telling everyone, "You should take this class." Now her dormitory hall monitor has asked her to prepare a talk on "credit and the young professional. She has decided to use a question-and-answer format. Help her answer the following questions. Questions 1. Why is it easy for college students to get and use credit cards? Aside from the obvious impact of "forgoing future consumription" to repay the debt, how can students' credit practices affect their financial future? 2. What are three debt and credit trends that suggest few people are practicing frugality? 3. What does it mean to determine your own borrowing capacity and stick to it? Why is this strategy necessary when choosing wealth"? 4. What is the relationship between borrowing capacity and an emergency account? What is the advantage or disadvantage of using less liquid accounts for erriergency savings and, in the event of an emergency, immediately relying on credit? 5. What financial ratios are useful in monitoring your borrowing capacity? How are these ratios calculated and interpreted? 6. Review the 12 "keys to success." Which strategies could you utilize to avoid bad debt? 7. Jena decided to use the time value of money tools from Chapter 3 to calculate the size of the monthly payments that a typical undergraduate would need to pay the average credit card debt of $3,051 over 1 year (12 monthly payments). assuming an annual interest rate of 17.5 percent. If, instead of having to make that credit card payment, a new college graduate invested that same amount monthly in a mutual fund eaming 8 percent on average, how much would he or she have for retirement in 45 years? Click on the table icon to view the FVIFA table B. Click on the table icon to view the FVIF table B. Click on the table icon to view the PVIFA table 1. Credit card application tables on campus, offers for free gifts, the cultural lure of easy credit (buy today, pay later), and the future dream of a high salary have made it very easy for college students to get and use credit cards. For this reason, , ), , students and others with little capacity to repay have the opportunity to get, use, and abuse credit. Credit bureaus provide your credit history or FICO credit score to creditors, to potential employers, or to other companies doing business with you like insurance companies that calculate the insurance credit score). Negative information about your debt practices in college sent to any of these sources could have a long-term effect on your financial future. If a potential employer chooses not to interview you because of a bad credit history, you reduce your opportunities to earn income. In addition, spending and credit practices can follow you from college. This only increases the problem and postpones a proactive solution to using and managing debt. Finally, a poor credit history and low credit score can have a direct cost through higher interest rates and insurance premiums; you represent a greater risk to a potential creditor or insurance company. X Are the above statements true or false? ? V. (Select from the drop-down menu.) -) Data table Data table Data table Future Value of an Annuity (FVIFA) n = 12 5%/12 12.2789 8%/12 12.3358 7%/12 12.3926 8%/12 12.4499 9%/12 12.5076 10%/12 12.5656 Compound Sum of $1 (FVIF) n = 44 n = 45 5% 8.5572 8.9850 6% 12.9855 13.7646 7% 19.6285 21.0025 8% 29.5560 31.9204 9% 44.3370 48.3273 10% 66.2641 72.8905 Present Value of an Annuity (PVIFA) n = 12 17.0%/12 10.9643 17.1%/12 10.9586 17.29/12 10.9529 17.3%/12 10.9472 17.4%/12 10.9416 17.5%/12 10.9359 17.6%/12 10.9302 17.79/12 10.9245 17.8%/12 10.9188 il check Jena has been so excited about what she has learned in her personal finance management class that she has been telling everyone, "You should take this class." Now her dormitory hall monitor has asked her to prepare a talk on "credit and the young professional. She has decided to use a question-and-answer format. Help her answer the following questions. Questions 1. Why is it easy for college students to get and use credit cards? Aside from the obvious impact of "forgoing future consumription" to repay the debt, how can students' credit practices affect their financial future? 2. What are three debt and credit trends that suggest few people are practicing frugality? 3. What does it mean to determine your own borrowing capacity and stick to it? Why is this strategy necessary when choosing wealth"? 4. What is the relationship between borrowing capacity and an emergency account? What is the advantage or disadvantage of using less liquid accounts for erriergency savings and, in the event of an emergency, immediately relying on credit? 5. What financial ratios are useful in monitoring your borrowing capacity? How are these ratios calculated and interpreted? 6. Review the 12 "keys to success." Which strategies could you utilize to avoid bad debt? 7. Jena decided to use the time value of money tools from Chapter 3 to calculate the size of the monthly payments that a typical undergraduate would need to pay the average credit card debt of $3,051 over 1 year (12 monthly payments). assuming an annual interest rate of 17.5 percent. If, instead of having to make that credit card payment, a new college graduate invested that same amount monthly in a mutual fund eaming 8 percent on average, how much would he or she have for retirement in 45 years? Click on the table icon to view the FVIFA table B. Click on the table icon to view the FVIF table B. Click on the table icon to view the PVIFA table 1. Credit card application tables on campus, offers for free gifts, the cultural lure of easy credit (buy today, pay later), and the future dream of a high salary have made it very easy for college students to get and use credit cards. For this reason, , ), , students and others with little capacity to repay have the opportunity to get, use, and abuse credit. Credit bureaus provide your credit history or FICO credit score to creditors, to potential employers, or to other companies doing business with you like insurance companies that calculate the insurance credit score). Negative information about your debt practices in college sent to any of these sources could have a long-term effect on your financial future. If a potential employer chooses not to interview you because of a bad credit history, you reduce your opportunities to earn income. In addition, spending and credit practices can follow you from college. This only increases the problem and postpones a proactive solution to using and managing debt. Finally, a poor credit history and low credit score can have a direct cost through higher interest rates and insurance premiums; you represent a greater risk to a potential creditor or insurance company. X Are the above statements true or false? ? V. (Select from the drop-down menu.) -) Data table Data table Data table Future Value of an Annuity (FVIFA) n = 12 5%/12 12.2789 8%/12 12.3358 7%/12 12.3926 8%/12 12.4499 9%/12 12.5076 10%/12 12.5656 Compound Sum of $1 (FVIF) n = 44 n = 45 5% 8.5572 8.9850 6% 12.9855 13.7646 7% 19.6285 21.0025 8% 29.5560 31.9204 9% 44.3370 48.3273 10% 66.2641 72.8905 Present Value of an Annuity (PVIFA) n = 12 17.0%/12 10.9643 17.1%/12 10.9586 17.29/12 10.9529 17.3%/12 10.9472 17.4%/12 10.9416 17.5%/12 10.9359 17.6%/12 10.9302 17.79/12 10.9245 17.8%/12 10.9188 il check