Assignments: PERSONAL FINANCE
Part 1
Assignment: Exercises- Explain your calculations for each exercise (at least 25 words per exercise)
1. Jenny Franklin estimates that as a result of completing her master's degree, she will earn $7,000 a year more for the next 40 years. a. What would be the total amount of these additional earnings? b. What would be the future value of these additional earnings based on an annual interest rate of 6 percent? (Use Table 1-B in the Chapter 1 Appendix.)
2. Brad Edwards is earning $45,000 a year in a city located in the Midwest. He is interviewing for a position in a city with a cost of living 12 percent higher than where he currently lives. What is the minimum salary Brad would need at his new job to maintain the same standard of living?
3. Calculating Future Value of Salary. During a job interview, Pam Thompson is offered a salary of $28,000. The company gives annual raises of 4 percent. What would be Pam's salary during her fifth year on the job?
4. Computing Future Value. Calculate the future value of a retirement account in which you deposit $2,000 a year for 30 years with an annual interest rate of 6 percent. (Use the tables in the Chapter 1 appendix.)
5. Comparing Taxes for Employee Benefits. Which of the following employee benefits has the greater value? Use the formula given in the Financial Planning Calculations box on page 65 to compare these benefits. (Assume a 28 percent tax rate.) a. A nontaxable pension contribution of $4,300 or the use of a company car with a taxable value of $6,325. b. A life insurance policy with a taxable value of $450 or a nontaxable increase in health insurance coverage valued at $340.
6. Comparing Employment Offers. Bill Mason is considering two job offers. Job 1 pays a salary of $36,500 with $4,500 of nontaxable employee benefits. Job 2 pays a salary of $34,700 and $6,120 of nontaxable benefits. Which position would have the higher monetary value? Use a 28 percent tax rate.
7. Calculating the After-Tax Value of Employee Benefits. Helen Meyer receives a travel allowance of $180 each Part from her company for time away from home. If this allowance is taxable and she has a 30 percent income tax rate, what amount will she have to pay in taxes for this employee benefit?
8. Future Value of Advanced Training. Ken Braden estimates that taking some classes would result in earning $3,500 more a year for the next 30 years. Based on an annual interest rate of 4 percent, calculate the future value of these classes.
9. Comparing the Value of a Career Change. Marla Opper currently earns $50,000 a year and is offered a job in another city for $56,000. The city she would move to has 8 percent higher living expenses than her current city. What quantitative analysis should Marla consider before taking the new position?
Essays: (500 words each)
Essay #1: Life Situation: Single, Age 21, No dependents, College student
Financial Data: Monthly Income $1,750, Living Expenses $1,210, Personal property $7,300, Savings $2,000, Student loan $3,000, Credit card debt $2,400
Shelby Johnson's current employment position, a grooming specialist for a local pet store, provides her with a lot interesting activities each day. While she is not part of management, she does have the opportunity to use various communication skills, record business transactions, and use current technology tools. Shelby especially enjoys working with the pets and their owners to achieve a pleasing experience.
Her income is based on an hourly wage which can result in financial stress during times of inflation. She has previously used her credit cards to help make ends meet each month. However, the experience she is gaining will be especially valuable when she opens her own pet salon in the future.
Questions:
1. Given her current situation, identify some positive and negative aspects of her current career.
2. What suggestions do you think Shelby should consider related to her current and future career activities.
3. Describe how Shelby might use the following Personal Financial Planner sheets for career planning: Résumé Worksheet and Preparing for an Interview.
Essay #2: At some point in your life you may use the services of a financial planner. However, your personal knowledge should be the foundation for most financial decisions. For each of these situations, determine actions you might recommend:
Situation 1: Fran and Ed Blake, ages 43 and 47, have a daughter who is completing her first year of college and a son three years younger. Currently they have $42,000 in savings and investment funds set aside for their children's education. With increasing education costs, they are concerned whether this amount is adequate. In recent months, Fran's mother has required extensive medical attention and personal care assistance. Unable to live alone, she is now a resident of a long-term care facility. The cost of this service is $4,750 a month, with annual increases of about 5 percent. While a major portion of the cost is covered by Social Security and her pension, Fran's mother is unable to cover the entire cost. In addition, Fran and Ed are concerned about saving for their own retirement. While they have consistently made annual deposits to a retirement fund, current financial demands may force them to access some of that money.
Situation 2: "While I knew it might happen someday, I didn't expect it right now." This was the reaction of Patrick Hamilton when his company merged with another organization and moved its offices to another state, resulting in him losing his job. Patrick does have some flexibility in his short-term finances since he has three months of living expenses in a saving account. However, "three months can go by very quickly," as Patrick noted.
Situation 3: Nina Resendiz, age 23, recently received a $12,000 gift from her aunt. Nina is considering various uses for these unexpected funds including paying off credit card bills from her last vacation or setting aside money for a down payment on a house. Or she might invest the money in a tax-deferred retirement account. Another possibility is using the money for technology certification courses to enhance her earning power. Nina also wants to contribute some of the funds to a homeless shelter and a world hunger organization. She is overwhelmed by the choices and comments to herself, "I want to avoid the temptation of wasting the money on impulse items. I want to make sure I use the money on things with lasting value."
Questions:
1. For each situation, identify the main financial planning issues that need to be addressed.
2. What additional information would you like to have before recommending actions in each situation?
3. Based on the information provided and your assessment of the situation, what actions would you recommend for the Blakes, Patrick, and Nina?
Part 2
Assignment: (approximately 1500 words total)
1. Conduct research to identify various budgeting and money management apps. Determine the features, ease of operation, and information provided by these apps. Which app would you consider using for your budgeting and money management activities?
2. Talk to a young single person, a young couple, and a middle-aged person about their financial goals and saving habits. What actions do they take to determine and achieve various financial goals? In your opinion, what more should/could they do?
3. Carl Lester has liquid assets of $2,680 and current liabilities of $2,436. What is his current ratio? What comments do you have about this financial position?
4. Based on the procedures presented in the course, prepare your current personal balance sheet and a cash flow statement for the next month.
5. Use the following items to prepare a balance sheet and a cash flow statement. Determine the total assets, total liabilities, net worth, total cash inflows, and total cash outflows. Items: Rent for the month- $650, Auto insurance- $230, Monthly take-home salary- $1,950, Household possessions- $3,400, Cash in checking account- $450, Stereo equipment- $2,350, Savings account balance- $1,890, Payment for electricity- $90, Spending for food- $345, Lunches/parking at work- $180, Balance of educational loan- $2,160, Donations- $70, Current value of automobile- $7,800, Home computer- $1,500, Telephone bill paid for month- $65, Value of stock investment- $860, Credit card balance- $235, Clothing purchase- $110, Loan payment- $80, Restaurant spending- $130.
6. Imari Brown is attending community college. She has $1,000 of education expenses. She claims herself on her tax return. She is trying to decide between the tuition and fees deduction or an education credit. If Imari is in the 15% tax bracket, which should she choose? Justify your answer.
7. Using the tax table in Exhibit 4-7 on page 136 of your text, determine the amount of taxes for the following situations: a. A head of household with taxable income of $75,750. b. A single person with taxable income of $75,052. c. A married person filing a separate return with taxable income of $75,926.
8. Samuel Jenkins made two investments, the first was 13 months ago and the second was two months ago. He just sold both investments and has capital gain of $2,000 on each. If Samuel is in the 28 percent tax bracket, what will be the amount of capital gains tax on each investment?
9. On December 30, you decide to make a $1,500 charitable donation. If you are in the 28 percent tax bracket, how much will you save in taxes for the current year? If you deposit that tax savings in a savings account for the next five years at 4 percent, what will be the future value of that account?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.