What is to be gained by incorporating both theory and practical tools, such as opportunity cost of time, into household planning?
> 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 does nonverbal communication mean?
> 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?
> 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.
> Do people make integrated financial decisions? Explain.
> What is the difference between strengths and weaknesses, on the one hand, and opportunities and threats, on the other?
> Marisa and Jennifer both attempted to put away $10,000 a year toward savings. Marisa used a 401(k) pension plan while Jennifer tried to do the same but was forced to pay taxes on that $10,000 in savings each year. Assuming that the process was the same e
> Richard and Monica have diametrically opposite points of view on debt. Richard views debt as an opportunity to generate cash to make up for past investment losses. He has asked you whether he should remortgage his house and place the proceeds in the stoc
> Describe SWOT analysis.
> Why is integration so important?
> How are we able to express the household goal in money terms when its underlying goals is to maximize utility—pleasure?
> Why is a household’s similarity with a business important?
> Why is periodic review important?
> What are the reasons that a financial plan is important?
> Some people say that money is the only goal that counts, while others indicate that once living costs are covered, it hardly matters at all. Indicate which statement you believe to be more accurate. Justify your answer.
> Do you believe loss aversion is practiced widely? Justify your answer.
> Why do some people have difficulty saving?
> How does satisficing compare with classical economic goals? Illustrate.
> Paulette, a trial attorney for a corporation, was forced to leave the field due to an injury to her vocal cords. She switched careers and became a lower-paying author. Fortunately, she had three disability policies. Policy A had an own occupation definit
> Melinda thought about going to a dealership two hours from her location to buy a new car. She was told she might be able to save $2,000 over purchasing it locally. She decided against it. What are possible reasons for doing so?
> What is cash flow planning?
> Why are financial ratios important?
> What are the reasons that a person’s gross saving percentage may be low, while his or her net cash flow may be high?
> How do basic feelings differ from higher-level feelings?
> What are human weaknesses under both money planning and life planning?
> Contrast money planning and life planning.
> Maya had a low nondiscretionary cost percentage and a high discretionary one. Is that good or bad? Explain.
> What is behavioral financial planning? Differentiate it from behavioral finance.
> Why bring figures from today to the beginning of the retirement period?
> Jeremy lost a wing of his house in a storm, which resulted in an outlay of $250,000 to replace it. The replacement cost on the house was $900,000, and he had $500,000 of insurance. His policy had an 80 percent coinsurance clause. How much will the insura
> Provide a reason why a real estate salesperson should not have the same amount allocated to his or her home as the average person.
> What factors would cause one to decrease the withdrawal rate?
> What factors would cause one to increase the withdrawal rate?
> Why perform a retirement needs analysis?
> Distinguish between technical analysis and fundamental analysis.
> What is the significance of bond ratings?
> Why are bond maturity dates important?
> Fred compared smaller-company fund returns against the Dow Jones Industrial Average. Is that advisable? Explain.
> How does a separate account differ from a mutual fund?
> What is the difference between a load and a no-load fund?
> Given the following information: Find the return on the whole life insurance policy when the cost of term is included. Which would you select if you can invest the difference between the term and whole life policies’ premiums at a 9 p
> Howard said he wouldn’t have to pay taxes on the money he inherited from his deceased father because it was under the $5.34 million threshold. He promptly withdrew the $900,000 that was in his father’s traditional IRA. Was his belief correct? Explain.
> What is a letter of instruction and why have it?
> Explain the difference between an executor and a guardian.
