PERSONAL FINANCE PROJECT

Answer the following questions. Critically think through your answers with the knowledge that you have learned in this class. You can refer back to the textbook. Keep in mind that this is worth 10% of your grade.

In todays world, most anyone can make purchases even without the money in hand to do so. There are many types of hard and fast rules for when it is acceptable to use credit. Today you will be analyzing a number of credit decisions. The key question is: Is this a wise use of credit?

Altair is looking at buying a car. This car will primarily be driven by his wife who takes the kids to various events. Their family has a total savings of $750. Should they buy a more expensive car than the total of their savings? Why or why not?

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Sallys favorite department store is offering an incredible deal this week on their store credit card. The deal states that if she spends $100, she gets $50 off her first bill. She does have some money saved up to spend in her checking account. This store is also having one of their biggest sales of the year. Should she open up a department store credit card? What additional information would be important to know to make a more informed decision?

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Jakes brother just told him about a credit card offer that his family has been using for some time. They get 10% cash back on all their purchases and pay the entire card off each month. Jake is hesitant to sign up for this card. What do you think he should do? What else would you want to know about Jake?

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Noa is looking at buying a foreclosed house near her apartment complex. It would be a stretch to make the mortgage payments each month, but the house is now selling for 40% of what it was listed for last year. What would you do? What else would you want to know?

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Fatima has never had any type of credit. Her family always taught her that she should never have any type of debt. If she just graduated college and has $20,000 in her savings account, how likely is it that she will be able to go her whole life without taking on any debt? At what point would the amount in her savings account change your answer? _____________________________________________________________________________________

6 What is one or two areas that you learned from this course thus far that you had no knowledge about? What did you learn? Research the topic and note two facts that you now know for the future.

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What are some of the most common mistakes you see people around you make when it comes to the use of loans and credit?

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Is It Worth It?

Read each scenario below and find two opportunity costs for each situation.

Sally just completed a 4-year degree in Marketing and has two student loans she must begin paying back in three months. After graduation, Sally decides to devote two years to The Peace Corp.

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Joe always has to have the latest and greatest technology even as a college student responsible for paying his own tuition. In the past six months, Joe has upgraded his cell phone before his contract was up for renewal, bought a brand new laptop, and purchased a 72-inch high definition television with a new gaming system. To fund these purchases he works 30 hours each week at a local bakery.

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Managing Income, Growth, and Liquidity

The Fowlers own a townhouse that they have been renting out for many years. It provides a steady source of income each month, but sometimes they have to do major repairs on it. What are some alternative investments the Fowlers could look into that would give this type of regular income stream? Give pros and cons for each along with your recommendation.

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Which investment is more liquid: a boat or jewelry? Why?

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What do you think has more risk: buying corporate bonds or buying a second house in hopes that housing prices increase?

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Suppose that you wanted to invest in something and you did not want it to pay any regular income (you want to make all your return when you sell it). What are some investments that fit this criterion?

Which is riskier: jumping off a house or jumping off of a skyscraper? Why?

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Match the following terms with one or more of the situations described below: risk, peril, hazard, personal risk, property risk, liability risk, negligence, or speculative risk. Also explain why your decision.

Not putting a fence around a pool

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Chance of getting cancer

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Skydiving

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Opening a new restaurant

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Living on the beach

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Letting your unlicensed cousin do the electrical work in your house

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Riding a bike without a helmet

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