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All Textbook Solutions for PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

1LO 2LO 3LO Examine the economic environments influence on personal financial planning.5LO 6LO 1FPE 2FPE 3FPE 4FPE 5FPE 6FPE 7FPE 8FPE 9FPE Income and Education. Using Exhibit 1.8, discuss the relationship between annual income and the highest level of education completed. Provide specific examples of the difference between having no high school diploma and having a bachelors degree, and between having a bachelors degree and a professional degree.1LO 2LO 3LO 4LO 5LO 6LO 1FPE 2FPE 3FPE 4FPE 5FPE 6FPE Discuss the basic principles of income taxes and determine your filing status.2LO 3LO Explain who needs to pay estimated taxes, when to file or amend your return, and how to handle an audit.Know where to get help with your taxes and how software can make tax return preparation easier.Implement an effective tax planning strategy.Calculating marginal tax rates. Piper Wells is single and received the items and amounts of income shown below during 2015, as shown below. Determine the marginal tax rate applicable to each item. Note that if the item is not taxable, the marginal rate is 0. ESTIMATING TAXABLE INCOME, TAX LIABILITY, AND POTENTIAL REFUND. Hannah Owens is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned 55,000 as a sales assistant for Business Solutions: 3,910 of her wages was withheld for federal income taxes. In addition, she had interest income of 142. She takes the standard deduction. Calculate her taxable income, tax liability, and tax refund or tax owed for 2015.3FPE 4FPE Calculating taxable income for a married couple filing jointly. Freya and Sebastian Hunter are married and have one child. Sebastian is putting together some figures so he can prepare the Hunters joint 2018 tax return. So far, hes been able to determine the following concerning income and possible deductions: Given this information, determine the amount of the available itemized deductions. How much taxable income will the Hunters have in 2018? (Note: Assume that Sebastian is not covered by a pension plan where he works, his child qualifies for the child tax credit, and the standard deduction of 24,000 for married filing jointly applies.)6FPE 7FPE 8FPE 9FPE Effective tax planning. Explain the key elements of effective tax planning. What are some of the most popular tax management strategies?11FPE 1LO Describe todays financial services marketplace, both depository and nondepository financial institutions.3LO 4LO 5LO Develop a cash management strategy that incorporates a variety of savings plans.Adapting to a low-interest-rate environment. A retired couple has expressed concern about the really low interest rates theyre earning on their savings. Theyve been approached by an adviser who says he has a sure-fire way to get them higher returns. What would you tell this retired couple about a low-interest-rate environment, and how would you recommend them to view the advisers new prospective investments?2FPE Choosing a new bank. Youre getting married and believe your present bank is not a good fit. Discuss how you should go about choosing a new bank and opening an account. Consider the factors that are important to you in selecting a banksuch as the type and ownership of new accounts and bank fees and charges.4FPE Calculating the net costs of checking accounts. Determine the annual net cost of these checking accounts: a. Monthly fee 4, check-processing fee of 20 cents, average of 23 checks written per month b. Annual interest of 1.5 percent paid if balance exceeds 750, 8 monthly fee if account falls below minimum balance, average monthly balance 815, account falls below 750 during four months 6FPE Calculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?DETERMINING THE RIGHT AM OUNT OF SHORT-TERM, LIQUID INVESTM ENTS. Leo and Ava Bryant together earn approximately 92,000 a year after taxes. Through an inheritance and some wise investing, they also have an investment portfolio with a value of almost 200,000. a. How much of their annual income do you recommend the Bryants hold in some form of liquid savings as reserves? Explain. b. How much of their investment portfolio do you recommend they hold in savings and other short-term investment vehicles? Explain. c. How much, in total, should they hold in short-term liquid assets?9FPE Design a plan to research and select a new or used automobile.2LO 3LO 4LO 5LO 6LO 1FPE Lease ersus purchase car decision. use wor sheet 5.1. Everett Adams is trying to decide whether to lease or purchase a new car costing $18,000. If he leases, he’ll have to pay a $600 security deposit and monthly payments of $450 over the 36-month term of the closed-end lease. On the other hand, if he buys the car, then he’ll have to make a $2,400 down payment and will finance the balance with a 36-month loan requiring monthly payments of $515; he’ll also have to pay a 6 percent sales tax ($1,080) on the purchase price, and he expects the car to have a residual value of $6,500 at the end of three years. Use the automobile lease versus purchase analysis form in Worksheet 5.1 to find the total cost of both the lease and the purchase, and then recommend the best strategy for Everett. 3FPE 4FPE 5FPE Changes in mortgage principal and interest over time. Explain how the composition of the principal and interest components of a fixed-rate mortgage change over the life of the mortgage. What are the implications of this change?Calculating required down payment on home purchase. How much would you have to put down on a house with an appraised value of 105,000 when the lender required an 80 percent loan-to-value ratio?8FPE 9FPE 10FPE 11FPE REFINANCING A MORTGAGE. USE WOR SHEET 5.4. Lily Nguyen purchased a condominium four years ago for 200,000, paying 1,250 per month on her 162,000, 8 percent, 25-year mortgage. The current loan balance is 152,401. Recently, interest rates dropped sharply, causing Lily to consider refinancing her condo at the prevailing rate of 6 percent. She expects to remain in the condo for at least four more years and has found a lender that will make a 6 percent, 21-year, 152,401 loan, requiring monthly payments of 1,065. Although there is no prepayment penalty on her current mortgage, Lily will have to pay 1,500 in closing costs on the new mortgage. She is in the 15 percent tax bracket. Based on this information, use the mortgage refinancing analysis form in Worksheet 5.4 to determine whether Lily should refinance her mortgage under the specified terms.1LO 2LO 3LO 4LO 5LO 6LO 1FPE 2FPE 3FPE 4FPE 5FPE 6FPE 7FPE 8FPE 9FPE 10FPE 11FPE 1LO Identify the various sources of consumer loans. 3LO 4LO 5LO 6LO 1FPE 2FPE Evaluating financing packages. Assume that you’ve been shopping for a new car and intend to finance part of it through an installment loan. The car you’re looking for has a sticker price of $18,000. Custom Vehicles has offered to sell it to you for $3,000 down and finance the balance with a loan that will require 48 monthly payments of $333.67. However, a competing dealership will sell you the exact same vehicle for $3,500 down, plus a 60-month loan for the balance, with monthly payments of $265.02. Which of these two financing packages is the better deal? 4FPE 5FPE 6FPE Calculating interest and APR of installment loan. Assuming that interest is the only finance charge, how much interest would be paid on a 5,000 installment loan to be repaid in 36 monthly installments of 166.10? What is the APR on this loan?8FPE 9FPE 10FPE 11FPE 1LO 2LO 3LO 4LO 5LO 6LO 1FPE 2FPE 3FPE 4FPE 5FPE 6FPE 7FPE 1LO 2LO 3LO 4LO 5LO 6LO 1FPE 2FPE 3FPE 4FPE 5FPE 6FPE 7FPE 8FPE 1LO Identify the types of coverage provided by homeowners insurance.3LO 4LO 5LO Choose a property and liability insurance agent and company, and settle claims. 1FPE 2FPE 3FPE 4FPE 5FPE 6FPE 7FPE 8FPE 1LO 2LO 3LO 4LO 5LO Describe an investment portfolio and how youd go about developing, monitoring, and managing a portfolio of securities.CALCULATE AMOUNT TO INEST TO MEET OBJECTIES. Use Worksheet 11.1. Mary Bender is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, what she would really like to do is open a bookstore of her own. She would like to open her store in about eight years and figures shell need about 50,000 in capital to do so. Given that Mary thinks she can make about 10 percent on her money, use Worksheet 11.1 to answer the following questions. a. How much would Mary have to invest today, in one lump sum, to end up with 50,000 in eight years? b. If shes starting from scratch, how much would she have to put away annually to accumulate the needed capital in eight years? c. If she already has 10,000 socked away, how much would she have to put away annually to accumulate the required capital in eight years? d. Given that Mary has an idea of how much she needs to save, explain how she could use an investment plan to help reach her objective.Why do you suppose that well-known companies such as Apple, Starbucks, and Facebook prefer to have their shares traded on the NASDAQ rather than on one of the major listed exchanges, such as the NYSE (for which theyd easily meet all listing requirements)? Whats in it for them? What would they gain by switching over to the NYSE?3FPE 4FPE 5FPE 6FPE 7FPE 8FPE 9FPE Describe the various types of risks to which investors are exposed, as well as the sources of return.2LO 3LO 4LO 5LO 6LO What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity). 2FPE 3FPE 4FPE Assume that you’ve just inherited $500,000 and have decided to invest a big chunk of it ($350,000, to be exact) in common stocks. Your objective is to build up as much capital as you can over the next 15 to 20 years, and you’re willing to tolerate a “good deal’’ of risk. What types of stocks (blue chips, income stocks, and so on) do you think you’d be most interested in, and why? Select at least three types of stocks and briefly explain the rationale for selecting each. Would your selections change if you were dealing with a smaller amount of money—say, only $50,000? What if you were a more risk-averse investor? 6FPE An investor in the 22 percent tax bracket is trying to decide which of two bonds to select: one is a 5.5 percent U.S. Treasury bond selling at par; the other is a municipal bond with a 4.25 percent coupon, which is also selling at par. Which of these two bonds should the investor select? Why? Describe and differentiate between a bonds (a) current yield and (b) yield to maturity. Why are these yield measures important to the bond investor? Find the yield to maturity of a 20-year, 9 percent, 1,000 par value bond trading at a price of 850. Whats the current yield on this bond?Which of these two bonds offers the highest current yield? Which one has the highest yield to maturity? a. A 6.55 percent, 22-year bond quoted at 52.000 b. A 10.25 percent, 27-year bond quoted at 103.625 10FPE 1LO 2LO 3LO 4LO 5LO 6LO 1FPE 2FPE 3FPE 4FPE 5FPE 6FPE 7FPE 8FPE 9FPE 10FPE 1LO 2LO 3LO 4LO 5LO 6LO 1FPE 2FPE 3FPE 4FPE 5FPE 6FPE 7FPE 8FPE 9FPE 10FPE 11FPE 1LO 2LO 3LO 4LO 5LO 6LO 1FPE 2FPE 3FPE 4FPE 5FPE 6FPE 7FPE 8FPE 9FPE 10FPE

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