Present Value. Juan would like to give his newly born grandson a gift of $10,000 on his eighteenth birthday. Juan expects to earn an 8% annual return on his investment. How much must he deposit now to achieve his goal?
> This month, the Sampsons increased their savings by $3,000 because they paid most of their expenses with a credit card. However, now their credit card has a balance of about $2,000. They will likely earn about 2% on the savings. Meanwhile, their credit c
> The Sampsons’ credit card has a credit limit of $10,000. They have just received a letter from the credit card company offering to increase their credit limit to $20,000. The Sampsons have also read several articles on identity theft and are concerned wi
> The Sampsons have just started saving $800 per month. This money will be placed in CDs every month, which they chose in Chapter 5. These funds, earmarked for a down payment on a car and their children’s college education, are not available to the Sampson
> Recall that the Sampsons would like to save a total of $1,000 per month. They notice that their local bank offers the certificate of deposit (CD) rates listed in the following table; they now need to determine if they should invest in CDs, and if so, whi
> IRA Contributions. Hareem is single and earned $104,300 in taxable income. He contributed $4,200 to an IRA during the year. How much did Hareem’s IRA contribution lower his tax liability?
> Savings Rate. If Angela is saving $380 per month, what is her savings rate (i.e., savings as a percentage of disposable income)?
> How can your post-high school education decisions affect your wealth?
> How can an application of personal finance skills increase your wealth?
> Financial Goals and Life Insurance. How are your financial goals related to the decision about whether to purchase life insurance?
> Retirement Planning. What is the retirement account trade-off?
> Protecting Your Assets and Income. How can you protect your assets and income? What is the insurance trade-off?
> Effective Financial Planning. What is the most common problem that prevents effective financial planning? Why do some people spend too much money? How can you use a budget to help you with spending issues?
> Financial Goals. What are some common financial goals?
> Estate Taxes. Jill just inherited $12 million from her grandfather in 2018. How much of the inheritance is subject to estate tax?
> Types of Estate Plan Documents. List several important documents that are important for estate planning.
> Defined-Contribution Plan. What is a defined contribution plan? Why have many employers switched to this type of plan? List some of the benefits a defined-contribution plan offers to employees.
> Tax Liability. Compute Lana’s tax liability if she is single and earned $74,400 in wages. She will take the standard deduction.
> Annuity Fees. What is a surrender charge? How much are common annuity commissions or insurance fees?
> Health Care and Retirement. Discuss health care concerns in retirement
> Roth 401(k). How does a Roth 401(k) differ from a traditional 401(k)?
> Correlation. What is correlation? How can you use this concept to reduce risk?
> Discount or Premium. What does it mean for a closed-end fund to trade at a discount? What does it mean for a closed-end fund to trade at a premium?
> Hedge Funds. What is a hedge fund? What type of individual invests in a hedge fund?
> Junk Bond Fund. What is a junk bond fund? What type of investor might be attracted to junk bond funds?
> Hybrid Fund. What is a hybrid fund? What are some of the advantages of hybrid funds?
> Socially Responsible Stock Funds. What are socially responsible stock funds? What types of stocks would this type of fund typically avoid owning?
> Choosing a Mutual Fund. What are some factors to consider prior to choosing a mutual fund?
> FICA Taxes and High Incomes. Jauna made $178,400 in salary during 2018. How much were her FICA withholdings for that year?
> ETF Advantages and Disadvantages. List the advantages and disadvantages of ETFs.
> Types of ETFs. List and briefly describe the different types of ETFs.
> ETFs. What is an ETF? How do ETFs differ from open-end stock funds?
> Corporate Bonds. What are corporate bonds? Are corporate bonds subject to default risk?
> Convertible Bond. What is a convertible bond? How does a bond’s convertibility feature affect its return? How does a convertible feature affect investor interest in purchasing the bond?
> Bonds and Your Financial Plan. What is the danger of having too much exposure to bonds in your investment portfolio?
> Bonds and Your Financial Plan. What benefits do bonds provide in an investment portfolio?
> Junk Bond. What is a junk bond? Why would an investor buy a junk bond?
> GSE Bonds. What is a GSE bond? How is interest income from a GSE bond treated for tax purposes?
> Federal Agency Bonds and Taxes. What types of tax incentives are offered by federal agency bonds?
> Itemized Deductions. Tracy is single and had adjusted gross income of $37,000 in 2018. Tracy also has the following items: Which of Tracy’s expenses might qualify as itemized deductions?
> Bond Price Sensitivity to Economic Conditions. Why are prices of some bonds more sensitive to economic conditions than others?
> Impact of Weak Economy on Bond Prices. Explain why prices of risky bonds may decline when economic conditions weaken.
> Maturity Matching. Describe the maturity matching strategy of investing in bonds. Give an example. Why is this strategy considered conservative?
> Passive Strategy. How does the passive strategy for bond investment work? What is the main disadvantage of this strategy?
> Interest Rate Strategy. Describe how the interest rate strategy for bond investment works. What are some of the potential problems with this strategy?
> Interest Rate Risk. How is interest rate risk affected by a bond’s maturity? How can investors use expectations of interest rate movements to their advantage?
> Bond Ratings and Conflict of Interest. Discuss the potential for conflict of interest in bond rating agencies prior to 2014. How did the Securities and Exchange Commission address this issue?
> Bond Values. What factors determine the value of a bond?
> Full-Service Broker. What type of services do full service brokers provide? What is one main disadvantage of using a full-service broker?
> Stock Quotations. List some of the information contained in a typical stock quotation from a financial website.
> Nasdaq. What is the Nasdaq? Describe how trades are carried out on the Nasdaq.
> Short Selling. What does it mean to short a stock? When would this strategy be used?
> Paying Off Debt. How are personal debt and investing related?
> Precious Metals. What are some common investment metals? List some ways to invest in precious metals.
> Publicly Traded Stock Indexes. What are publicly traded stock indexes, or exchange-traded funds (ETFs)? What are the benefits of ETFs to investors?
> Group Term Insurance. What is group term insurance? How do the premiums on group term compare to premiums on individually purchased term insurance?
> Decreasing-Term Insurance. What is decreasing term insurance? Why would someone purchase this type of life insurance?
> Term Insurance Premiums. What are some factors that affect term life insurance premiums?
> Psychology and Life Insurance. Why is it difficult for many people to buy life insurance even though they need it to protect loved ones?
> Life Insurance Needs. Discuss the factors that affect the amount of life insurance someone needs to purchase.
> Future Value and Motivation. Refer to Problem 19. How much will Monica have at retirement if she earns 12% a year? Compare the two amounts. Should the difference affect Monica’s choice of investment vehicle? Data from Problem 19: Future Value and Motiva
> Preexisting Conditions. How did the ACA change the way insurance companies treat persons with preexisting conditions?
> Cost of Medical Care. Why is the cost of medical care increasing? How does this trend affect the cost of health insurance?
> Determinants of Patient Costs. What factors determine how much the policyholder must pay for a given claim?
> Other Health Care Coverage. What are some common types of health care that may be covered in a typical health insurance policy?
> Insurance Agents. What is an insurance agent? What is the difference between a captive agent and an independent agent?
> Premium. What is an insurance premium? Why do premiums vary?
> Risk Avoidance. What does it mean to avoid risk? How can you apply this knowledge to your personal situation?
> Personal Property Floater. What is a personal property floater? What are some common items homeowners add floaters to cover?
> Cash Value Insurance. What is a “cash value” homeowner’s policy? What is a “replacement cost” homeowner’s policy?
> Uninsured Motorist Coverage. What is uninsured motorist coverage? Why is this coverage necessary?
> Future Value and Motivation. Monica intends to invest $400 a month in her company’s retirement plan. The company will match the entire amount. How much will Monica have in her retirement account after forty years if she earns an annual return of 8%?
> No-Fault Auto Insurance. What is a no-fault auto insurance program? How do no-fault insurance affect personal injury litigation?
> Real Estate Agents. What services do real estate agents and brokers provide?
> Economic Conditions and Job Stability. How do economic conditions and the stability of your job affect the home buying decision?
> Mortgage Preapproval. What does it mean to be preapproved for a mortgage? Why is it beneficial to get preapproved for a mortgage?
> Mortgage Default. What does it mean to default on a mortgage? How do changing home values affect mortgage defaults?
> Economic Conditions. How do strong economic conditions affect home values? Explain how a weak economy affects the values of homes.
> Debt Consolidation. Explain debt consolidation loans. When is it advisable to use a debt consolidation loan?
> Subsidized Versus Unsubsidized Student Loans. What is the difference between subsidized and unsubsidized student loans?
> Avoiding Scams. List some things that should raise red flags with regard to online lending.
> No-Debt Solution. What is the no-debt solution in reference to buying a car? What is the limited-debt solution?
> Present Value. Cheryl wants to have $2,000 in spending money to take on a trip to Disney World in three years. How much must she deposit now in a savings account that pays 3% per year to have the money she needs in three years?
> Selecting a Car. List the factors you need to consider when selecting a car to buy. Discuss each briefly.
> Credit Repair Services. Explain why it is not advisable to use credit repair services
> Interest on Credit Cards. Compare the amount of interest you earn on typical money market investments versus the amount of interest paid on credit cards.
> Balance Transfer Cards. How can a balance transfer card help you save money?
> Rewards Cards. List some examples of common rewards offered to cardholders.
> Credit CARD Act. What are the three major impacts of the Credit CARD Act?
> Impact of Credit Report. Explain how a weak credit report can affect you.
> Credit Counseling. Explain the advantages and disadvantages of using a credit counseling organization.
> Checking Credit Scores. Why should you be careful about checking your credit score on one of the numerous “free” sites?
> Liquidity Risk. How does liquidity risk affect money management?
> Using Time Value to Estimate Savings. DeMarcus wants to retire with $1 million in savings by the time he turns 60. He is currently 18 years old. How much will he need to save each year, assuming he can get a 10% annual return on his investments?
> Economic Impact on Asset Values. Explain in logical terms why values of assets such as homes and stocks may decline during a weak economy. How does this change affect your net worth?
> Charitable Gifts. How are charitable gifts treated for tax purposes?
> Credit Rights. Under what conditions does the Equal Credit Opportunity Act prohibit creditors from denying credit? If you are denied credit, do you have the right to know the reason for the denial?
> Risk Premium on a Deposit. A local bank offers a deposit that earns 4% annual interest. The deposit is backed by the government if the bank fails. What is the risk premium of this depost?
> Time Value and Savings. How can an understanding of the time value of money motivate you to save more money?
> What are some possible disadvantages of using online sources of personal finance information?
> Cash Versus Credit. Why should some people use cash to make purchases instead of credit?
