What does nonverbal communication mean?
> Magdalena, age 35, has $72,000 accumulated in savings. She projects she will save $23,000 a year until her retirement at age 67. Her current cost of living is $100,000. In retirement, she will receive $31,704 per year in Social Security and $20,000 in pe
> The Smiths had $110,000 in savings at age 51. They had a desired retirement age of 65. They want to fund through age 92. Assume a 4 percent inflation rate and a 5 percent after tax rate for investment both pre- and postretirement. They have household inc
> Frank, age 28, wants to calculate his resources in real (inflation-adjusted) terms. Calculate the amount of resources made available by age 65 retirement if $18,000 a year is saved. Assume that outflows from ages 65 to 90 are at the rate of $27,000 a yea
> Brad and Barbara made an appointment to see me concerning their own financial situation. They were a newly married couple in their early 20s. Barbara came from a family whose parents had children early in their lives; the women were full-time mothers unt
> Eleanor needs $40,000 a year to live on in retirement net of the income she will receive. She will be retiring in 22 years and is funding for a 25-year retirement. The inflation rate is expected to be 3.5 percent a year and the after-tax return on her in
> If the investment rate of return is 7 percent after tax and the inflation rate is 4 percent, find the blended rate of return.
> Y Co. has a projected dividend of $2.00, has a required rate of return of 8 percent, and is expected to grow 6 percent a year. Solve for its anticipated stock price.
> Pamela bought a bond for $926 with a face value of $1,000 and an annual coupon of $50. If the bond matures in 18 years, what is her yield to maturity?
> If a bond has annual interest payments of $50 and a par value of $1,000, with six years to maturity, what is its current market value if bonds like it are currently offering a 7 percent yield?
> Beth bought a bond at $800 with annual coupon payments of $40. If the bond is due in nine years and has a par value of $1,000, what is her yield to maturity under both the approximate method and the more exact method.
> Multicolor Corp. had an annual coupon of $60.00, a face value of $1,000, and a market value of $840. Calculate the coupon yield and the current yield.
> Tricontinental’s bond had a liquidity risk of 1 percent, a maturity risk of 2 percent, a pure rate of return of 1.5 percent, and an inflation premium of 4.0 percent. If the expected bond yield was 17 percent, what was the default risk? What does your ans
> Maurice gave $20,000 to charity each year. He had $20,000 in stock that cost him $14,000 to buy. Assuming he is in the 23 percent marginal tax bracket for capital gains, how much will he save by donating the stock directly to charity?
> Sophia inherited 1,000 shares of IBM that her father’s parents bought for her when she was a child. The father’s cost was $2 per share at the time of purchase and $84 per share at the time of his death. Sophia sold them at $86 per share. Calculate the to
> Brad and Barbara say they use credit cards all the time. They always intend to pay them off by the end of the month, but they often don’t. In fact, their credit card debt has been rising recently. Required: 1. Is this pattern common? 2. What is your rec
> John inherited $1 million in an IRA, which comprised the entire estate from his father, who had recently died. He promptly withdrew the funds. The appropriate marginal tax rate was 39.6 percent. Was there any tax due? If so, how much? Assume it was $1 mi
> Compare a pretax $10,000 sum placed in bonds yielding 6 percent in a qualified pension with an investment in a municipal bond yielding 5 percent. The municipal bond sum deposited was made with after-tax dollars on the same pretax $10,000. The marginal ta
> The estimated value of a real estate asset in a financial statement prepared by a Certified Financial Planner licensee should be based upon the a. Basis of the asset, after taking into account all straight-line and accelerated depreciation. b. Client’s e
> Arrange the following financial planning functions in the logical order in which these functions are performed by a professional financial planner. 1. Interview clients, identify preliminary goals 2. Monitor financial plans 3. Prepare financial plan 4. I
> You receive a phone call from someone you have not spoken to recently. The caller is excited, having just heard that a brand new mutual fund is positioned to deliver large gains in the coming year. The caller wishes to purchase shares of the fund through
> What are the differentiating factors between regular annuity and annuity due?
> The cost of time is a noncash charge, so why is it important?
> What types of investments are suited to retirement planning at age 67 assuming the person is 55 and has an average risk tolerance?
> What kinds of investments are best suited to saving for the down payment on a house to be made in three years?
> Explain why under CAPM company risk can be diversified away.
> What is involved in establishing the cap rate?
> Laurence bought a classic car for $40,000 as a business investment opportunity. He was allowed to depreciate it over 10 years and take the amount as a business tax deduction on his return. At the end of 10 years, the car was sold for $40,000. If Laurence
> If you had to select one method of valuation for real estate, which would it be? Why?
> How are spending decisions made according to the life cycle theory of savings?
> Is the home likely to be a good investment? Explain.
> How should exchange traded funds (ETF) and other commodities be treated from an investment standpoint? What is their main value? Explain.
> Why is investing in gold appealing?
> What do commodities protect against? What is the downside to commodity investment?
> What is the cap rate’s significance in terms of real estate?
> Why do people purchase a home?
> Why is education a capital expenditure?
> Why are durable goods considered to be capital expenditures?
> What is the annual benefit of parents gifting $300 each year to their child if the parents are in the 35 percent bracket and the child is in the 15 percent bracket?
> Why calculate a profitability index?
> Compare capital expenditures with marketable securities as an investment.
> How do people choose their goods?
> Is leasing less costly than purchasing? Explain.
> Why are more people leasing?
> What are the advantages of leasing over purchasing in general?
> Name three factors involved in the purchase of a car.
> What changes in day-to-day capital expenditure selections can you recommend?
> Compare capital budgeting practices as outlined in this chapter with those used on a day-to-day basis.
> What are four techniques that are helpful in becoming a good listener?
> Sally was able to negotiate a deferral in her $8,000 bonus from December to the beginning of January. Compute the benefit of receiving the bonus in January, assuming that she is in a 30 percent marginal tax bracket and could earn 6 percent after tax per
> What is APR and why is it important?
> Harry was deciding on the separation of outlays into nondiscretionary and discretionary. What advice would you offer him on the division as it relates to risk?
> If the discount rate on a proposed investment is raised, what happens to its present value? Why?
> Why is listening important in the financial planning process?
> Contrast operating risk and financial risk.
> What is behavioral finance?
> What is the significance of choosing to construct a segmented financial plan?
> How is Maslow’s hierarchy of needs related to income?
> Are goals more short-term or long-term oriented? Explain your answer.
> Melinda earned $50,000 and paid taxes of $12,500. She would have paid $35 on the next $100 she made. Compute her average and marginal tax brackets.
> How do commission communications vary from other types?
> How do financial and personal interpretations of financial planning differ?
> What does standard of living mean to you?
> Why is data gathering important?
> What rate is most often used for time value of money calculations?
> How does behavioral finance differ from quantitative finance?
> What is data gathering?
> How can you improve your credit? Indicate the specific steps to do so.
> What borrowing mechanism provides the lowest cost. Why?
> Are loans from friends and relatives a good practice? Explain.
> Elizabeth, age 62, wanted to consider the benefits of age 62 Social Security at a reduced 75 percent payout versus full payments at age 66. She could invest the monies at 5.5 percent after tax and expects to live until age 88. She will receive $15,000 a
> Pension loans save you money because you pay yourself back. True or false? Explain.
> Why borrow using secured debt?
> Why are goals important for financial planning?
> When is a home equity loan better than refinancing a first mortgage?
> Why are adjustable-rate mortgages generally cheaper than fixed-rate mortgage loans?
> What are the differences between financial planning and a financial plan?
> How does financial counseling differ from financial advising?
> What is debt’s role in the household?
> How do you establish trust?
> What is a pro forma statement? What is its use?
> Kenneth was considering whether to place $10,000 in a tax-deferred annuity or a tax-free municipal bond. Assume the municipal bond returned 5 percent a year and the tax-deferred annuity 6 percent. Calculate approximately how long he would have to hold th
> Contrast a functional and a traditional cash flow statement.
> Detail the sections of a functional cash flow statement.
> What is a cash flow statement, and why is it important?
> What is household equity, and how do you calculate it?
> What is the major difference between household accounting and business accounting?
> What is a balance sheet, and why is it important?
> What makes the household the financial structure for the individual?
> What is to be gained by incorporating both theory and practical tools, such as opportunity cost of time, into household planning?
> How do finance and economics differ in emphasis?
> If operating efficiently is the main goal of a household enterprise, are there any drawbacks?
> Dawn and Mildred had the same starting sum of $120,000. Each made withdrawals of $24,000 a year. In years 2, 3, and 4, each had returns of 9 percent a year. Dawn had a 50 percent drop in year 1 and a 50 percent gain in year 5, while Mildred had a 50 perc
> What would be the consequence of not accounting for inflation?
> What is future value and how is it calculated?
> How is the Rule of 72 a helpful tool?
> What is the significance of IRR?
> How do you think the financial planner will be of the most help to Dan and Laura? Be specific and explain why.
> Name some common financial problems with which planners deal with.
> What does a financial planner do?
> Define the household in financial terms.
