Personal Finance 101
I would like to thank you for signing up for Personal Finance 101. I think this
is one of the most critical courses you may take in your college career; whether
you are a business major or not. We all have hopes and dreams for ourselves
and our families. Our dreams must be planned for and somehow paid for. This
is true of our first new car; a home; or a college education for our children.
This class is designed to help you come to decisions of what is important in your
life, set goals and how to wisely spend your hard earned money. We will explore
how to set up a budget, manage cash; handle credit cards; buy a car; buy a house;
make insurance decisions; buy stocks and bonds; and plan for retirement. This is
a lot to accomplish in one semester and will require you to think and work hard.
Like almost everything in life, the more you put into this process the more you will
get out of it.
I would like to thank Chuck Kueny and Melissa Salas for their integral part in
arranging this preface. Without them I would not have the student prospective on
how to make this book flow the best.
I sincerely hope this semester is interesting, thought provoking and fun.
Professor Richard Ghidella
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Table of Contents
Preface
1
Semester Grade Tracking Sheet 4
Notable Quotes 5
Time Value of Money 6
Future Value of a Dollar
6
Future Value of an Annuity 8
Present Value of a Dollar
10
Present Value of an Annuity 12
Time Value of Money Section Quiz and Review 14
Valuing Bonds Review 17
Time Value of Money Reference Charts 19
Goal Worksheets 23
Income/Expenditure/Balance Sheets 29
Future Income Calculator 33
Financial Plan Outline 42
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Grade Sheet
Item
Date
My Grade
Pts Possible
Quiz 01
10
Quiz 02
10
Quiz 03
10
Quiz 04
10
Quiz 05
10
Quiz 06
10
Quiz 07
10
Quiz 08
10
Exam 1
100
Quiz 09
10
Quiz 10
10
Quiz 11
10
Quiz 12
10
Quiz 13
10
Quiz 14
10
Quiz 15
10
Quiz 16
10
Quiz 17
10
Video Report
50
Exam 2
100
Exam 3
100
Personal Plan
300
Final Exam
100
Group Presentation
100
Total
950
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Famous and Almost
Famous Quotes
“The most miraculous formula I ever worked with is compound interest.”
—Albert Einstein
“Had I have known how money worked I’d be a millionaire today instead of broke.”
—Jason Alexander,
Citrus College
“Time value of money is the basis of all financial decision making. It doesn’t matter whether you’re buying a car or building a billion-dollar manufacturing plant.
The decision always reverts back to time value of money.”
—Professor Richard Ghidella
“Quality is never an accident. It is always the result of high intention, sincere
effort, intelligent direction and skillful execution. It represents the wise choice
among many alternatives.”
—Author Unknown
“I wish I would have known all about how money works when I was in high
school. I could have started investing long before college. It should be taught in
high schools around the country.”
—Natalie Franceschi
Citrus College
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Future Value of a Dollar
The future value of a dollar deals with the amount a lump sum will be worth
sometime in the future
Say you put $5,000 dollars in the bank for 3 years at an interest rate of 10%. To
see how much this money would be worth after 3 years you would use the future
value of a dollar chart, and set up a table like the one below.
K = interest rate
N = the number of years $ is traveling
Make a Table:
P.V
F.V
K = 10
N=3
(Money invested) $5000
$6655.50
⫻
=
——————>
1.33110
After the table is set up you must look at the future value of a dollar chart and find
the number that corresponds with the given interest rate and the number of years
you are investing your money. Multiply this number by the amount of money being invested each year and you will have the future value of that dollar.
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How much money will you have if you invest the following?
1. $5,000 FOR 3 years at 10%?
2. $5,000 FOR 3 years at 7%?
3. $10,000 FOR 2 years at 12%?
4. $10,000 FOR 2 years at 9%?
5. $3,000 FOR 7 years at 12%?
6. $3,000 FOR 7 years at 5%?
7. $4,000 FOR 30 years at 10%?
8. $4,000 FOR 40 years at 12%?
9. $2,000 FOR 30 years at 8%?
10. $2,000 FOR 30 years at 7%?
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Future Value of an Annuity
The future value of an annuity deals with the amount your investments will be
worth sometime in the future
Say you invest $5,000 every year for 3 years at an interest rate of 10%. You want
to see how much this money will be worth after three years
K = interest rate
N = the number of years $ is traveling
Make a Table:
P.V
F.V
K = 10
N=3
(Money invested) $5,000 / / / / / / / / / / $16,550
⫻
=
———————>
3.3100
After the table is set up you must look at the future value of an annuity chart and
find the number that corresponds with the given interest rate and the number
of years you are investing your money. Multiply this number by the amount of
money being invested each year and you will have the future value of that annuity.
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How much money will you have if you invest the following?
1. $5,000 EACH YEAR FOR 3 years at 10%?
2. $5,000 EACH YEAR FOR 3 years at 7%?
3. $10,000 EACH YEAR FOR 2 years at 12%?
4. $10,000 EACH YEAR FOR 2 years at 9%?
5. $3,000 EACH YEAR FOR 7 years at 12%?
6. $3,000 EACH YEAR FOR 7 years at 5%?
7. $4,000 EACH YEAR FOR 30 years at 10%?
8. $4,000 EACH YEAR FOR 40 years at 12%?
9. $2,000 EACH YEAR FOR 30 years at 8%?
10. $2,000 EACH YEAR FOR 40 years at 7%?
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Present Value of a Dollar
Finding the present value of a dollar is taking a lump sum from the future and
finding out what it would be worth today
Example: You are promised $5,000 in three years. Interest rates are 10%. You
want to see how much these payments will be worth today as a lump sum.
K = interest rate
N = the number of years $ is traveling
Make a table:
P.V
F.V
K = 10
N=3
$3756.50
=
$5,000
⫻
<———————————
.7513
(When bringing money back through time you must place it at the end of the table)
After the chart is set up you must refer to the present value of a dollar chart and
find the number that corresponds with the interest rate and the number of years
the money is traveling. Multiply this number by the amount of money being discounted every year and you will have the present value of that dollar.
Note: when bringing a dollar back through time, the amount will be less than what you started with.
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What is the Present Value of money in? What is it worth today?
1. $5,000 DISCOUNTED 3 years at 10%?
2. $5,000 DISCOUNTED 3 years at 7%?
3. $10,000 DISCOUNTED 2 years at 12%?
4. $10,000 DISCOUNTED 2 years at 9%?
5. $3,000 DISCOUNTED 7 years at 12%?
6. $3,000 DISCOUNTED 7 years at 5%?
7. $100,000 DISCOUNTED 30 years at 10%?
8. $100,000 DISCOUNTED 40 years at 12%?
9. $1,000,000 DISCOUNTED 30 years at 8%?
10. $1,000,000 DISCOUNTED 40 years at 7%?
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Present Value of an Annuity
Finding the present value of an annuity is taking a number of equal payments
from the future and finding out what they will be worth today.
Example: You have $5,000 dollars promised to you each year for three years. You
want to discount the money at 10%. You want to see how much these payments
will be worth today as a lump sum.
K = the interest rate, N = number of years money is traveling
Make a table:
P.V
F.V
K = 10
N=3
$12,434.50 / / / $5,000
=
⫻
<————————
2.4869
(When bringing money back through time you must place it at the end of the table)
After the chart is set up you must go to the present value of an annuity chart and
find the number that corresponds with the interest rate and the number of years
the money is traveling. Multiply this number by the amount of money being discounted every year and you will have the present value of that annuity.
Note: when bringing an annuity back through time, the amount should be less then the sum of all the payments. In
this example the sum of all the payments is $15,000.
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How much is the following Annuity worth?
1. $5,000 EACH YEAR DISCOUNTED 3 years at 10%?
2. $5,000 EACH YEAR DISCOUNTED 3 years at 7%?
3. $10,000 EACH YEAR DISCOUNTED 2 years at 12%?
4. $10,000 EACH YEAR DISCOUNTED 2 years at 9%?
5. $3,000 EACH YEAR DISCOUNTED 7 years at 12%?
6. $3,000 EACH YEAR DISCOUNTED 7 years at 5%?
7. $4,000 EACH YEAR DISCOUNTED 20 years at 10%?
8. $4,000 EACH YEAR DISCOUNTED 30 years at 12%?
9. $2,000 EACH YEAR DISCOUNTED 20 years at 10%?
10. $2,000 EACH YEAR DISCOUNTED 30 years at 12%?
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Quiz
1. You invest $5,000 in Account A FOR 10 years and earn 10% return. You invest
$3,000 in Account B FOR 10 years at 8%. How much do you have in 10 years in
total?
2. You invest $25,000 for 10 years at 8%. You open a second account and invest
$3,000 each year for 10 years at 10%. How much do you have in total?
3. You are offered $100,000 in 10 years.
a. Using a discount rate of 8% what is it worth today?
b. Using a discount rate of 10% what is it worth today?
4. What is the value of an annuity that will pay you $5,000 each year for 30 years
at a discount rate of 6%? What is the value of the annuity if you use a 12% discount rate?
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In-Class Review
1. Your Uncle Scooter wants you to invest in his pie shop. He wants only $15,000
and will pay you back in 8 years. Knowing the wheels fell off his last venture you
demand 14% return. How much does Scooter need to pay you in 8 years?
2. Uncle Scooter says you have a screw loose, but will give you $11,000 in 8 years.
What is the present value of the offer? K = 14
3. You explain the present value to your Uncle Scooter who is perplexed (not uncommon for Scooter). Scooter adds 2 pies a week to the $11,000 deal for 8 years.
The pies are worth $10.50 each and you want the pies. What is the new present
value? K=14
4. Scooter takes on a partner who is a part-time finance instructor, smart, and is
good looking. Because of this you reduce your return requirement from 14% to
10%. Use the needed data from question 3 and determine the present value.
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In-Class Review # 2
TIME FOR SOME HARD STUFF!
1. You have $30,000 in an IRA that will earn 14% into the future. Your 401K has a
$35,000 balance and you add $4,500 per year and it will earn 12%. You have two
Zero coupon bonds with a current return of 8% maturing in 25 years with a face
value of $25,000 for each bond. After maturing, you will invest the balance of the
Zero’s at 5% until you retire. How much money do you have in 30 years?
2. Using the answer from question 1, answer the following question. You want to
retire in 30 years and be retired for 20 years. All investments will earn 10% in
retirement. How much will you be able to withdraw each year in retirement?
3. How much do you need to deposit each year in a retirement plan if you plan
to retire in 30 years, be retired for 25 years and want $125,000 in retirement income? K = 12 before retirement and K = 10 after retirement?
16
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Valuing Bonds
When valuing bonds you need four pieces of information:
1. Bonds Face Value
2. Maturity Date
3. Coupon Rate
4. The interest rate in the current market environment
Valuing a Bond takes 2 steps:
1. Use PVA to discount the interest payments
2. Use PV$ to value the return of principle.
Example:
You have a bond with a face value of $10,000; a coupon rate of 8%; maturity date
is 20 years from today and the current rate environment is 10%.
Solve as follows:
$10,000 ⫻ .08 (coupon rate) = $800 interest payment per year
Use the interest rate of the current environment in the present value equations.
$10,000 ⫻ PV$ K = 10 N = 20 (.1486) = $1,486
$800 ⫻ PVA K = 10 N = 20 (8.5136) = $6,811
Bond Value = $8,297
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Solve the Value of the Following
Bonds
A bond with a face value of $25,000;
Coupon rate of 10% maturing in 30 years.
What is the value of the bond in a . . .
1a) 5% rate environment =
1b) 8% rate environment =
1c) 12% rate environment =
A bond with a face value of $100,000;
Coupon rate of 7% maturing in 10 years.
What is the value of the bond in a . . .
2a) 6% rate environment =
2b) 9% rate environment =
2c) 10% rate environment =
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19
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1%
0.9901
0.9803
0.9706
0.9610
0.9515
0.9420
0.9327
0.9235
0.9143
0.9053
0.8613
0.8195
0.7798
0.7419
0.7059
0.6717
0.6391
0.6080
0.5785
Period
1
2
3
4
5
6
7
8
9
10
15
20
25
30
35
40
45
50
55
0.9804
0.9612
0.9423
0.9238
0.9057
0.8880
0.8706
0.8535
0.8368
0.8203
0.7430
0.6730
0.6095
0.5521
0.5000
0.4529
0.4102
0.3715
0.3365
2%
1
(l + i)N
0.9709
0.9426
0.9151
0.8885
0.8626
0.8375
0.8131
0.7894
0.7664
0.7441
0.6419
0.5537
0.4776
0.4120
0.3554
0.3066
0.2644
0.2281
0.1968
3%
0.9615
0.9246
0.8890
0.8548
0.8219
0.7903
0.7599
0.7307
0.7026
0.6756
0.5553
0.4564
0.3751
0.3083
0.2534
0.2083
0.1712
0.1407
0.1157
4%
0.9524
0.9070
0.8638
0.8227
0.7835
0.7462
0.7107
0.6768
0.6446
0.6139
0.4810
0.3769
0.2953
0.2314
0.1813
0.1420
0.1113
0.0872
0.0683
5%
0.9434
0.8900
0.8396
0.7921
0.7473
0.7050
0.6651
0.6274
0.5919
0.5584
0.4173
0.3118
0.2330
0.1741
0.1301
0.0972
0.0727
0.0543
0.0406
6%
Present Value of $1 at the End of n Periods
Equation: PVIFLN =
Table A–1
0.9346
0.8734
0.8163
0.7629
0.7130
0.6663
0.6227
0.5820
0.5439
0.5083
0.3624
0.2584
0.1842
0.1314
0.0937
0.0668
0.0476
0.0339
0.0242
7%
0.9259
0.8573
0.7938
0.7350
0.6806
0.6302
0.5835
0.5403
0.5002
0.4632
0.3152
0.2145
0.1460
0.0994
0.0676
0.0460
0.0313
0.0213
0.0145
8%
0.9174
0.8417
0.7722
0.7084
0.6499
0.5963
0.5470
0.5019
0.4604
0.4224
0.2745
0.1784
0.1160
0.0754
0.0490
0.0318
0.0207
0.0134
0.0087
9%
n
N
0.9091
0.8264
0.7513
0.6830
0.6209
0.5645
0.5132
0.4665
0.4241
0.3855
0.2394
0.1486
0.0923
0.0573
0.0356
0.0221
0.0137
0.0085
0.0053
10%
i
I
0.8929
0.7972
0.7118
0.6355
0.5674
0.5066
0.4523
0.4039
0.3606
0.3220
0.1826
0.1037
0.0588
0.0334
0.0189
0.0107
0.0061
0.0035
0.0020
12%
14%
o
PMT
0.8772
0.7695
0.6750
0.5921
0.5194
0.4556
0.3996
0.3506
0.3075
0.2697
0.1401
0.0728
0.0379
0.0196
0.0102
0.0053
0.0027
0.0014
0.0007
Table Value
PV
Financial Calculator Keys
0.8696
0.7561
0.6575
0.5718
0.4972
0.4323
0.3759
0.3269
0.2843
0.2472
0.1229
0.0611
0.0304
0.0151
0.0075
0.0037
0.0019
0.0009
0.0005
15%
1.0
FV
20
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1
2
3
4
5
6
7
8
9
10
15
20
25
30
35
40
45
50
55
0.9901
1.9704
2.9410
3.9020
4.8534
5.7955
6.7282
7.6517
8.5660
9.4713
13.8651
18.0456
22.0232
25.8077
29.4086
32.8347
36.0945
39.1961
42.1472
Number
of
Periods 1%
0.9804
1.9416
2.8839
3.8077
4.7135
5.6014
6.4720
7.3255
8.1622
8.9826
12.8493
16.3514
19.5235
22.3965
24.9986
27.3555
29.4902
31.4236
33.1748
2%
n
0.9709
1.9135
2.8286
3.7171
4.5797
5.4172
6.2303
7.0197
7.7861
8.5302
11.9379
14.8775
17.4131
19.6004
21.4872
23.1148
24.5187
25.7298
26.7744
3%
0.9615
1.8861
2.7751
3.6299
4.4518
5.2421
6.0021
6.7327
7.4353
8.1109
11.1184
13.5903
15.6221
17.2920
18.6646
19.7928
20.7200
21.4822
22.1086
4%
0.9524
1.8594
2.7232
3.5460
4.3295
5.0757
5.7864
6.4632
7.1078
7.7217
10.3797
12.4622
14.0939
15.3725
16.3742
17.1591
17.7741
18.2559
18.6335
5%
0.9434
1.8334
2.6730
3.4651
4.2124
4.9173
5.5824
6.2098
6.8017
7.3601
9.7122
11.4699
12.7834
13.7648
14.4982
15.0463
15.4558
15.7619
15.9905
6%
0.9346
1.8080
2.6243
3.3872
4.1002
4.7665
5.3893
5.9713
6.5152
7.0236
9.1097
10.5940
11.6536
12.4090
12.9477
13.3317
13.6055
13.8007
13.9399
7%
8%
0.9259
1.7833
2.5771
3.3121
3.9927
4.6229
5.2064
5.7466
6.2469
6.7101
8.5595
9.8181
10.6748
11.2578
11.6546
11.9246
12.1084
12.2335
12.3186
Present Value of an Annutiy of $1 per Period for n Periods
I
Equation: PVIF LN= ⌺ 1 = 1 - (I+i)n = I - I
ii (I + i)I
i
i i(I + i)n
Table A–2
0.9174
1.7591
2.5313
3.2397
3.8897
4.4859
5.0330
5.5348
5.9942
6.4177
8.0607
9.1285
9.8226
10.2737
10.5668
10.7574
10.8812
10.9617
11.0140
9%
n
N
0.9091
1.7355
2.4869
3.1699
3.7908
4.3553
4.8684
5.3349
5.7590
6.1446
7.6061
8.5136
9.0770
9.4269
9.6442
9.7791
9.8628
9.9148
9.9471
10%
i
I
0.8929
1.6901
2.4018
3.0373
3.6048
4.1114
4.5638
4.9676
5.3282
5.6502
6.8109
7.4694
7.8431
8.0552
8.1755
8.2438
8.2825
8.3045
8.3170
12%
14%
o
PMT
0.8772
1.6467
2.3216
2.9137
3.4331
3.8887
4.2883
4.6389
4.9464
5.2161
6.1422
6.6231
6.8729
7.0027
7.0700
7.1050
7.1232
7.1327
7.1376
Table Value
PV
Financial Calculator Keys
0.8696
1.6257
2.2832
2.8550
3.3522
3.7845
4.1604
4.4873
4.7716
5.0188
5.8474
6.2593
6.4641
6.5660
6.6166
6.6418
6.6543
6.6605
6.6636
15%
1.0
FV
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1%
1.0100
1.0201
1.0303
1.0406
1.0510
1.0615
1.0721
1.0829
1.0937
1.1046
1.1610
1.2202
1.2824
1.3478
1.4889
1.6446
1.8167
Period
1
2
3
4
5
6
7
8
9
10
15
20
25
30
40
50
60
1.0200
1.0404
1.0612
1.0824
1.1041
1.1262
1.1487
1.1717
1.1951
1.2190
1.3459
1.4859
1.6406
1.8114
2.2080
2.6916
3.2810
2%
1.0300
1.0609
1.0927
1.1255
1.1593
1.1941
1.2299
1.2668
1.3048
1.3439
1.5580
1.8061
2.0938
2.4273
3.2620
4.3839
5.8916
3%
1.0400
1.0816
1.1249
1.1699
1.2167
1.2653
1.3159
1.3686
1.4233
1.4802
1.8009
2.1911
2.6658
3.2434
4.8010
7.1067
10.520
4%
1.0500
1.1025
1.1576
1.2155
1.2763
1.3401
1.4071
1.4775
1.5513
1.6289
2.0789
2.6533
3.3864
4.3219
7.0400
11.467
18.679
5%
6%
1.0600
1.1236
1.1910
1.2625
1.3382
1.4185
1.5036
1.5938
1.6895
1.7908
2.3966
3.2071
4.2919
5.7435
10.286
18.420
32.988
Future Value of $1 at the End of n Periods
Equation: PVIFLN = (I + i)n
Table A–3
1.0700
1.1449
1.2250
1.3108
1.4026
1.5007
1.6058
1.7182
1.8385
1.9672
2.7590
3.8697
5.4274
7.6123
14.974
29.457
57.946
7%
1.0800
1.1664
1.2597
1.3605
1.4693
1.5869
1.7138
1.8509
1.9990
2.1589
3.1722
4.6610
6.8485
10.063
21.725
46.902
101.26
8%
1.0900
1.1881
1.2950
1.4116
1.5386
1.6771
1.8280
1.9926
2.1719
2.3674
3.6425
5.6044
8.6231
13.268
31.409
74.358
176.03
9%
n
N
1.1000
1.2100
1.3310
1.4641
1.6105
1.7716
1.9487
2.1436
2.3579
2.5937
4.1772
6.7275
10.835
17.449
45.259
117.39
304.48
10%
i
I
1.1200
1.2544
1.4049
1.5735
1.7623
1.9738
2.2107
2.4760
2.7731
3.1058
5.4736
9.6463
17.000
29.960
93.051
289.00
897.60
12%
14%
o
PMT
1.1400
1.2996
1.4815
1.6890
1.9254
2.1950
2.5023
2.8526
3.2519
3.7072
7.1379
13.743
26.462
50.950
188.88
700.23
2595.9
Table Value
PV
Financial Calculator Keys
1.1500
1.3225
1.5209
1.7490
2.0114
2.3131
2.6600
3.0590
3.5179
4.0456
8.1371
16.367
32.919
66.212
267.86
1083.7
4384.0
15%
1.0
FV
22
7612_Book_p001-048.pdf 22
10/22/10 9:16 AM
n
1
2
3
4
5
6
7
8
9
10
15
20
25
30
40
50
60
1.0000
2.0100
3.0301
4.0604
5.1010
6.1520
7.2135
8.2857
9.3685
10.462
16.097
22.019
28.243
34.785
48.886
64.463
81.670
Number
of
Periods 1%
1.0000
2.0200
3.0604
4.1216
5.2040
6.3081
7.4343
8.5830
9.7546
10.950
17.293
24.297
32.030
40.568
60.402
84.579
114.05
2%
1.0000
2.0300
3.0909
4.1836
5.3091
6.4684
7.6625
8.8923
10.159
11.464
18.599
26.870
36.459
47.575
75.401
112.80
163.05
3%
1.0000
2.0400
3.1216
4.2465
5.4163
6.6330
7.8983
9.2142
10.583
12.006
20.024
29.778
41.646
56.085
95.026
152.67
237.99
4%
1.0000
2.0500
3.1525
4.3101
5.5256
6.8019
8.1420
9.5491
11.027
12.578
21.579
33.066
47.727
66.439
120.80
209.35
353.58
5%
1.0000
2.0600
3.1836
4.3746
5.6371
6.9753
8.3938
9.8975
11.491
13.181
23.276
36.786
54.865
79.058
154.76
290.34
533.13
6%
1.0000
2.0700
3.2149
4.4399
5.7507
7.1533
8.6540
10.260
11.978
13.816
25.129
40.995
63.249
94.461
199.64
406.53
813.52
7%
Future Value of an Annuity of $1 per Period for n Periods
Equation: PVIF LN = ⌺ (I+i)n-I = (I+i)n-I
I=i
i
Table A–4
1.0000
2.0800
3.2464
4.5061
5.8666
7.3359
8.9228
10.637
12.488
14.487
27.152
45.762
73.106
113.28
259.06
573.77
1253.2
8%
1.0000
2.0900
3.2781
4.5731
5.9847
7.5233
9.2004
11.028
13.021
15.193
29.361
51.160
84.701
136.31
337.88
815.08
1944.8
9%
n
N
1.0000
2.1000
3.3100
4.6410
6.1051
7.7156
9.4872
11.436
13.579
15.937
31.772
57.275
98.347
164.49
442.59
1163.9
3034.8
10%
i
I
1.0000
2.1200
3.3744
4.7793
6.3528
8.1152
10.089
12.300
14.776
17.549
37.280
72.052
133.33
241.33
767.09
2400.0
7471.6
12%
14%
o
PMT
1.0000
2.1400
3.4396
4.9211
6.6101
8.5355
10.730
13.233
16.085
19.337
43.842
91.025
181.87
356.79
1342.0
4994.5
18535
Table Value
PV
Financial Calculator Keys
1.0000
2.1500
3.5056
4.9934
6.7424
8.7537
11.067
13.727
16.786
20.304
47.580
102.44
212.79
434.75
1779.1
7217.7
29220
15%
1.0
FV
Goals
“We all have dreams and somewhere along the line we need to turn that dream into
a goal. I say it all the time, ‘A goal is a dream with a deadline.’”
—Arte Moreno
(Owner of the Anaheim Angels)
You need to develop 50 goals. Your goals need to be broken down into five categories: Career (job), Religious/community, Education, Family, and Personal goals.
It is easier to do the goals in bullet form and they should be a mix of both short
(less than a year); intermediate (1–5 years) and long term goals (over 5 years). You
can have more than 10 goals in one area and less in others. Each section must have
at least 4 goals.
Your goals need to be specific and time-driven!
•
I want to pay down my credit cards.
This is a bad goal because it is not specific or time driven.
Instead, a good goal would be to say . . .
•
I want to pay my credit card balance down to $5,000 by the end of the year and
pay off the entire balance in 18 months.
23
7612_Book_p001-048.pdf 23
10/22/10 9:17 AM
Career
Example: Intern somewhere next semester
This goal is not specific enough.
Be more specific in terms of when and in what particular field.
Intern this spring semester at an advertising company.
This is more appropriate because now it is clear when you plan on doing this and
it more clearly states in what field you will be interning.
1. ________________________________________________________________
2. ________________________________________________________________
3. ________________________________________________________________
4. ________________________________________________________________
5. ________________________________________________________________
6. ________________________________________________________________
7. ________________________________________________________________
8. ________________________________________________________________
9. ________________________________________________________________
10. ________________________________________________________________
24
7612_Book_p001-048.pdf 24
10/22/10 10:13 AM
Community/Religious
* You are not required to have religious goals but you are required to have community goals
Example: Contribute to a charity
This goal is not specific enough.
It needs to be more specific in terms of time and amount of money you will be
contributing.
Contribute $25 each month to the “Food For The Poor” program in the city of Azusa.
This is more appropriate because now it is clear how much you plan on contributing, how often, and to which charity.
11. ________________________________________________________________
12. ________________________________________________________________
13. ________________________________________________________________
14. ________________________________________________________________
15. ________________________________________________________________
16. ________________________________________________________________
17. ________________________________________________________________
18. ________________________________________________________________
19. ________________________________________________________________
20. ________________________________________________________________
25
7612_Book_p001-048.pdf 25
10/22/10 9:16 AM
Educational
Example: To earn a degree
This goal is not specific enough.
It needs to be more specific and time driven.
To earn my bachelor’s degree in business by 2014 from Cal State Fullerton.
This is more appropriate because now it is clear what the major is, what degree
you plan on receiving, what school you plan on attending, and when you plan on
achieving this goal.
21. ________________________________________________________________
22. ________________________________________________________________
23. ________________________________________________________________
24. ________________________________________________________________
25. ________________________________________________________________
26. ________________________________________________________________
27. ________________________________________________________________
28. ________________________________________________________________
29. ________________________________________________________________
30. ________________________________________________________________
26
7612_Book_p001-048.pdf 26
10/22/10 9:16 AM
Family
Example: Take an extra family trip
This goal is not specific enough.
Be more specific in terms of when, how long, and how much are you willing spend.
Take a family trip during the summer to Big Bear for one week. Spend $1000 maximum.
This is more appropriate because now it is clear when you plan on taking the trip,
location, how long it will be, and the maximum amount you are willing to spend
during the trip.
31. ________________________________________________________________
32. ________________________________________________________________
33. ________________________________________________________________
34. ________________________________________________________________
35. ________________________________________________________________
36. ________________________________________________________________
37. ________________________________________________________________
38. ________________________________________________________________
39. ________________________________________________________________
40. ________________________________________________________________
27
7612_Book_p001-048.pdf 27
10/22/10 10:13 AM
Personal
Example: Read a Book
This goal is not specific enough.
Be more specific in terms of time and cost.
Spend half an hour each night during the week reading a book from my book list.
This is more appropriate because now it is clear how much reading you plan on
during the week and what books you plan on reading.
41. ________________________________________________________________
42. ________________________________________________________________
43. ________________________________________________________________
44. ________________________________________________________________
45. ________________________________________________________________
46. ________________________________________________________________
47. ________________________________________________________________
48. ________________________________________________________________
49. ________________________________________________________________
50. ________________________________________________________________
28
7612_Book_p001-048.pdf 28
10/22/10 10:13 AM
Current Month
Due Date ___________
INCOME AND EXPENDITURES STATEMENT
Name(s) Joe Student
For the Month of Sept. 2005
INCOME
Wages and salaries
Self-employment income
Bonuses and commissions
Pensions and annuities
Investment income
Ending
O 2005
Name: Bulldog Gym (Personal Trainer)
Name:
Name:
$
1,2075.00
$
1,2075.00
Interest received
Dividends received
Rents received
Sale of securities
Other
Other income
(I) Total Income
EXPENDITURES
Housing
Utilities
Food
Autos
Medical
Clothing
Insurance
Taxes
(net income)
Appliances, furniture,
and other major purchases
Personal care
Recreation and entertainment
Other items
Rent/mortgage payment
(include Insurance and taxes, if applicable)
Repairs, maintenance, improvements
Gas, electric, water
Phone
Cable TV and other
Groceries
Dining out
Loan payments
License plates, fees, etc.
Gas, oil, repairs, tires, maintenance
Health, major medical, disability insurance
(payroll deductions or not provided by employer)
Doctor, dentist, hospital, medicines
Clothes, shoes, and accessories
Homeowner’s (if not covered by mortgage payment)
Life (not provided by employer)
Auto
Income and social security
Property (if not Included in mortgage)
Loan payments
Purchases and repairs
Laundry, cosmetics, hair care
Vacations
Other recreation and entertainment
Gym Member ip
$ Paid by Parents*
95.44
40.00
Paid by Parents*
100.00
Paid by Parents†
200.00
38.00
27.00
Paid by Parents*
522.46
137.00
61.00
60.00
(II) Total Expenditures
$
758.44
CASH SURPLUS (OR DEFICIT) [(I) – (II)]
$
+516.56
29
7612_Book_p001-048.pdf 29
10/22/10 9:16 AM
Current Month
Due Date ___________
BALANCE SHEET
Name(s) Joe Student
Dated
ASSETS
LIABILITIES AND NET WORTH
Liquid Assets (Selling Co s)
Cash on hand
$320.00
In checking
970.73
Savings accounts
678.46
Money market
N/A
funds and deposits
Certificates of deposit
N/A
(<1 yr. to maturity)
Total Liquid Assets
$1,969.19
Investments
Stocks
Bonds
Certificates of deposit
(>1 yr. to maturity)
Mutual funds
09/05
Current Liabilities
Utilities
Rent
Insurance premiums
Taxes
Medical/dental bills
Repair bills
Bank credit card balances
Dept. store credit card
balances
Travel and entertainment
card balances
Gas and other credit card
balances
Bank line of credit
balances
Other current liabilities
$ Paid by
Parents*
1,108.14
4,822.75
2,408.37
5,000
Total current Liabilities
Real estate
Retirement funds, IRA
Other
Total Investments
200.00
$5,200.00
Real Property
Primary residence
Second home
Other
Total Real Property
Personal Property
Auto(s):
Auto(s):
Recreational vehicles
Household furnishings
Jewelry and artwork
Other
Other
Total Personal Property
(I) Total Assets
Long-Term Liabilities
Primary residence
mortgage
Second home mortgage
Real estate investment
mortgage
Auto loans
Appliance/furniture loans
Home Improvement loans
Single-payment loans
Educational loans
Other long-term loans
$ Paid by
Parents+
$8,339.26
13,027.41
Total Long-Term Liabilities
$7,169.19
$13,027.41
(II) Total Liabilities
$ 21,366.67
Net Worth [(I) – (II)]
$ -14,197.48
Total Liabilities and Net Worth
$ 7,169.19
30
7612_Book_p001-048.pdf 30
10/22/10 9:16 AM
Current Month
Due Date ___________
INCOME AND EXPENDITURES STATEMENT
Name(s)
For the
INCOME
Wages and salaries
Self-employment income
Bonuses and commissions
Pensions and annuities
Investment income
Ending
Name:
Name:
Name:
$
Interest received
Dividends received
Rents received
Sale of securities
Other
Other income
(I) Total Income
$
EXPENDITURES
Housing
Utilities
Food
Autos
Medical
Clothing
Insurance
Taxes
Appliances, furniture,
and other major purchases
Personal care
Recreation and entertainment
Rent/mortgage payment
(include Insurance and taxes, if applicable)
Repairs, maintenance, improvements
Gas, electric, water
Phone
Cable TV and other
Groceries
Dining out
Loan payments
License plates, fees, etc.
Gas, oil, repairs, tires, maintenance
Health, major medical, disability insurance
(payroll deductions or not provided by employer)
Doctor, dentist, hospital, medicines
Clothes, shoes, and accessories
Homeowner’s (if not covered by mortgage payment)
Life (not provided by employer)
Auto
Income and social security
Property (if not Included in mortgage)
Loan payments
Purchases and repairs
Laundry, cosmetics, hair care
Vacations
Other recreation and entertainment
Other items
(II) Total Expenditures
$
CASH SURPLUS (OR DEFICIT) [(I) – (II)]
$
31
7612_Book_p001-048.pdf 31
10/22/10 9:16 AM
Current Month
Due Date ___________
BALANCE SHEET
Name(s)
Dated
ASSETS
Liquid Assets
Cash on hand
In checking
Savings accounts
Money market
funds and deposits
Certificates of deposit
(<1 yr. to maturity)
Total Liquid Assets
LIABILITIES AND NET WORTH
$
$
Investments
Stocks
Bonds
Certificates of deposit
(>1 yr. to maturity)
Mutual funds
Current Liabilities
Utilities
Rent
Insurance premiums
Taxes
Medical/dental bills
Repair bills
Bank credit card balances
Dept. store credit card
balances
Travel and entertainment
card balances
Gas and other credit card
balances
Bank line of credit
balances
Other current liabilities
$
Total current Liabilities
Real estate
Retirement funds, IRA
Other
Total Investments
$
Real Property
Primary residence
Second home
Other
Total Real Property
Personal Property
Auto(s):
Auto(s):
Recreational vehicles
Household furnishings
Jewelry and artwork
Other
Other
Total Personal Property
Auto loans
Appliance/furniture loans
Home Improvement loans
Single-payment loans
Educational loans
Other long-term loans
$
(I) Total Assets
Long-Term Liabilities
Primary residence
mortgage
Second home mortgage
Real estate investment
mortgage
Total Long-Term Liabilities
$
$
(II) Total Liabilities
$
Net Worth [(I) – (II)]
$
Total Liabilities and Net Worth
$
32
7612_Book_p001-048.pdf 32
10/22/10 9:16 AM
Calculating Future Income
How do I know how much I will make in 1, 3, and 5 years, or retirement?
If you are a full-time student and don’t know how much your career will pay, go
to the Transfer Center. You don’t know what career you want? You must pick one.
You must pick a career and use that career to project income.
To project income use FV$. If you make $25,000 today and feel you will get a
4% raise each year over the next 3 years . . .
$25,000 ⫻ FV$ (K = 4, N = 3) 1.1249 = $28,123
Your projected income 3 years from now is $28,123.
33
7612_Book_p001-048.pdf 33
10/22/10 9:16 AM
1 Year From Today
Due Date ___________
INCOME AND EXPENDITURES STATEMENT
Name(s)
For the
INCOME
Wages and salaries
Self-employment income
Bonuses and commissions
Pensions and annuities
Investment income
Ending
Name:
Name:
Name:
$
Interest received
Dividends received
Rents received
Sale of securities
Other
Other income
(I) Total Income
$
EXPENDITURES
Housing
Utilities
Food
Autos
Medical
Clothing
Insurance
Taxes
Appliances, furniture,
and other major purchases
Personal care
Recreation and entertainment
Rent/mortgage payment
(include Insurance and taxes, if applicable)
Repairs, maintenance, improvements
Gas, electric, water
Phone
Cable TV and other
Groceries
Dining out
Loan payments
License plates, fees, etc.
Gas, oil, repairs, tires, maintenance
Health, major medical, disability insurance
(payroll deductions or not provided by employer)
Doctor, dentist, hospital, medicines
Clothes, shoes, and accessories
Homeowner’s (if not covered by mortgage payment)
Life (not provided by employer)
Auto
Income and social security
Property (if not Included in mortgage)
Loan payments
Purchases and repairs
Laundry, cosmetics, hair care
Vacations
Other recreation and entertainment
Other items
(II) Total Expenditures
$
CASH SURPLUS (OR DEFICIT) [(I) – (II)]
$
34
7612_Book_p001-048.pdf 34
10/22/10 9:16 AM
1 Year From Today
Due Date ___________
BALANCE SHEET
Name(s)
Dated
ASSETS
Liquid Assets
Cash on hand
In checking
Savings accounts
Money market
funds and deposits
Certificates of deposit
(<1 yr. to maturity)
Total Liquid Assets
LIABILITIES AND NET WORTH
$
$
Investments
Stocks
Bonds
Certificates of deposit
(>1 yr. to maturity)
Mutual funds
Current Liabilities
Utilities
Rent
Insurance premiums
Taxes
Medical/dental bills
Repair bills
Bank credit card balances
Dept. store credit card
balances
Travel and entertainment
card balances
Gas and other credit card
balances
Bank line of credit
balances
Other current liabilities
$
Total current Liabilities
Real estate
Retirement funds, IRA
Other
Total Investments
$
Real Property
Primary residence
Second home
Other
Total Real Property
Personal Property
Auto(s):
Auto(s):
Recreational vehicles
Household furnishings
Jewelry and artwork
Other
Other
Total Personal Property
Auto loans
Appliance/furniture loans
Home Improvement loans
Single-payment loans
Educational loans
Other long-term loans
$
(I) Total Assets
Long-Term Liabilities
Primary residence
mortgage
Second home mortgage
Real estate investment
mortgage
Total Long-Term Liabilities
$
$
(II) Total Liabilities
$
Net Worth [(I) – (II)]
$
Total Liabilities and Net Worth
$
35
7612_Book_p001-048.pdf 35
10/22/10 9:16 AM
3 Years From Today
Due Date ___________
INCOME AND EXPENDITURES STATEMENT
Name(s)
For the
INCOME
Wages and salaries
Self-employment income
Bonuses and commissions
Pensions and annuities
Investment income
Ending
Name:
Name:
Name:
$
Interest received
Dividends received
Rents received
Sale of securities
Other
Other income
(I) Total Income
$
EXPENDITURES
Housing
Utilities
Food
Autos
Medical
Clothing
Insurance
Taxes
Appliances, furniture,
and other major purchases
Personal care
Recreation and entertainment
Rent/mortgage payment
(include Insurance and taxes, if applicable)
Repairs, maintenance, improvements
Gas, electric, water
Phone
Cable TV and other
Groceries
Dining out
Loan payments
License plates, fees, etc.
Gas, oil, repairs, tires, maintenance
Health, major medical, disability insurance
(payroll deductions or not provided by employer)
Doctor, dentist, hospital, medicines
Clothes, shoes, and accessories
Homeowner’s (if not covered by mortgage payment)
Life (not provided by employer)
Auto
Income and social security
Property (if not Included in mortgage)
Loan payments
Purchases and repairs
Laundry, cosmetics, hair care
Vacations
Other recreation and entertainment
Other items
(II) Total Expenditures
$
CASH SURPLUS (OR DEFICIT) [(I) – (II)]
$
36
7612_Book_p001-048.pdf 36
10/22/10 9:16 AM
3 Years From Today
Due Date ___________
BALANCE SHEET
Name(s)
Dated
ASSETS
Liquid Assets
Cash on hand
In checking
Savings accounts
Money market
funds and deposits
Certificates of deposit
(<1 yr. to maturity)
Total Liquid Assets
LIABILITIES AND NET WORTH
$
$
Investments
Stocks
Bonds
Certificates of deposit
(>1 yr. to maturity)
Mutual funds
Current Liabilities
Utilities
Rent
Insurance premiums
Taxes
Medical/dental bills
Repair bills
Bank credit card balances
Dept. store credit card
balances
Travel and entertainment
card balances
Gas and other credit card
balances
Bank line of credit
balances
Other current liabilities
$
Total current Liabilities
Real estate
Retirement funds, IRA
Other
Total Investments
$
Real Property
Primary residence
Second home
Other
Total Real Property
Personal Property
Auto(s):
Auto(s):
Recreational vehicles
Household furnishings
Jewelry and artwork
Other
Other
Total Personal Property
Auto loans
Appliance/furniture loans
Home Improvement loans
Single-payment loans
Educational loans
Other long-term loans
$
(I) Total Assets
Long-Term Liabilities
Primary residence
mortgage
Second home mortgage
Real estate investment
mortgage
Total Long-Term Liabilities
$
$
(II) Total Liabilities
$
Net Worth [(I) – (II)]
$
Total Liabilities and Net Worth
$
37
7612_Book_p001-048.pdf 37
10/22/10 9:16 AM
5 Years From Today
Due Date ___________
INCOME AND EXPENDITURES STATEMENT
Name(s)
For the
INCOME
Wages and salaries
Self-employment income
Bonuses and commissions
Pensions and annuities
Investment income
Ending
Name:
Name:
Name:
$
Interest received
Dividends received
Rents received
Sale of securities
Other
Other income
(I) Total Income
$
EXPENDITURES
Housing
Utilities
Food
Autos
Medical
Clothing
Insurance
Taxes
Appliances, furniture,
and other major purchases
Personal care
Recreation and entertainment
Rent/mortgage payment
(include Insurance and taxes, if applicable)
Repairs, maintenance, improvements
Gas, electric, water
Phone
Cable TV and other
Groceries
Dining out
Loan payments
License plates, fees, etc.
Gas, oil, repairs, tires, maintenance
Health, major medical, disability insurance
(payroll deductions or not provided by employer)
Doctor, dentist, hospital, medicines
Clothes, shoes, and accessories
Homeowner’s (if not covered by mortgage payment)
Life (not provided by employer)
Auto
Income and social security
Property (if not Included in mortgage)
Loan payments
Purchases and repairs
Laundry, cosmetics, hair care
Vacations
Other recreation and entertainment
Other items
(II) Total Expenditures
$
CASH SURPLUS (OR DEFICIT) [(I) – (II)]
$
38
7612_Book_p001-048.pdf 38
10/22/10 9:16 AM
5 Years From Today
Due Date ___________
BALANCE SHEET
Name(s)
Dated
ASSETS
Liquid Assets
Cash on hand
In checking
Savings accounts
Money market
funds and deposits
Certificates of deposit
(<1 yr. to maturity)
Total Liquid Assets
LIABILITIES AND NET WORTH
$
$
Investments
Stocks
Bonds
Certificates of deposit
(>1 yr. to maturity)
Mutual funds
Current Liabilities
Utilities
Rent
Insurance premiums
Taxes
Medical/dental bills
Repair bills
Bank credit card balances
Dept. store credit card
balances
Travel and entertainment
card balances
Gas and other credit card
balances
Bank line of credit
balances
Other current liabilities
$
Total current Liabilities
Real estate
Retirement funds, IRA
Other
Total Investments
$
Real Property
Primary residence
Second home
Other
Total Real Property
Personal Property
Auto(s):
Auto(s):
Recreational vehicles
Household furnishings
Jewelry and artwork
Other
Other
Total Personal Property
Auto loans
Appliance/furniture loans
Home Improvement loans
Single-payment loans
Educational loans
Other long-term loans
$
(I) Total Assets
Long-Term Liabilities
Primary residence
mortgage
Second home mortgage
Real estate investment
mortgage
Total Long-Term Liabilities
$
$
(II) Total Liabilities
$
Net Worth [(I) – (II)]
$
Total Liabilities and Net Worth
$
39
7612_Book_p001-048.pdf 39
10/22/10 9:16 AM
Retirement ___________ Years from Now
Due Date ___________
INCOME AND EXPENDITURES STATEMENT
Name(s)
For the
INCOME
Wages and salaries
Self-employment income
Bonuses and commissions
Pensions and annuities
Investment income
Ending
Name:
Name:
Name:
$
Interest received
Dividends received
Rents received
Sale of securities
Other
Other income
(I) Total Income
$
EXPENDITURES
Housing
Utilities
Food
Autos
Medical
Clothing
Insurance
Taxes
Appliances, furniture,
and other major purchases
Personal care
Recreation and entertainment
Rent/mortgage payment
(include Insurance and taxes, if applicable)
Repairs, maintenance, improvements
Gas, electric, water
Phone
Cable TV and other
Groceries
Dining out
Loan payments
License plates, fees, etc.
Gas, oil, repairs, tires, maintenance
Health, major medical, disability insurance
(payroll deductions or not provided by employer)
Doctor, dentist, hospital, medicines
Clothes, shoes, and accessories
Homeowner’s (if not covered by mortgage payment)
Life (not provided by employer)
Auto
Income and social security
Property (if not Included in mortgage)
Loan payments
Purchases and repairs
Laundry, cosmetics, hair care
Vacations
Other recreation and entertainment
Other items
(II) Total Expenditures
$
CASH SURPLUS (OR DEFICIT) [(I) – (II)]
$
40
7612_Book_p001-048.pdf 40
10/22/10 9:16 AM
Retirement ___________ Years from Now
Due Date ___________
BALANCE SHEET
Name(s)
Dated
ASSETS
Liquid Assets
Cash on hand
In checking
Savings accounts
Money market
funds and deposits
Certificates of deposit
(<1 yr. to maturity)
Total Liquid Assets
LIABILITIES AND NET WORTH
$
$
Investments
Stocks
Bonds
Certificates of deposit
(>1 yr. to maturity)
Mutual funds
Current Liabilities
Utilities
Rent
Insurance premiums
Taxes
Medical/dental bills
Repair bills
Bank credit card balances
Dept. store credit card
balances
Travel and entertainment
card balances
Gas and other credit card
balances
Bank line of credit
balances
Other current liabilities
$
Total current Liabilities
Real estate
Retirement funds, IRA
Other
Total Investments
$
Real Property
Primary residence
Second home
Other
Total Real Property
Personal Property
Auto(s):
Auto(s):
Recreational vehicles
Household furnishings
Jewelry and artwork
Other
Other
Total Personal Property
Auto loans
Appliance/furniture loans
Home Improvement loans
Single-payment loans
Educational loans
Other long-term loans
$
(I) Total Assets
Long-Term Liabilities
Primary residence
mortgage
Second home mortgage
Real estate investment
mortgage
Total Long-Term Liabilities
$
$
(II) Total Liabilities
$
Net Worth [(I) – (II)]
$
Total Liabilities and Net Worth
$
41
7612_Book_p001-048.pdf 41
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Financial Plan—Bringing It All
Together (Suggested Outline)
SECTION ONE
Your 50 goals.
SECTION TWO
Describe your current financial position (about
one page in length). Include current income and
balance sheets.
SECTION THREE
Your 1, 3, and 5-year income and balance sheets
SECTION FOUR
Write a 3 page narrative about the changes year
to year in your life (financial and personal) to
correspond to your 1, 3, and 5-year statements.
SECTION FIVE
Your income and balance sheets at retirement
along with a one page narrative.
SECTION SIX
Time Value of Money Calculations—Required
SECTION SEVEN
Other information—Print out the house you
want from the internet with the price from the
Internet or newspaper. Also print out the type of
car you want to drive along with any additional
information that will help me give you an “A” on
this report.
MAKE SURE THAT YOUR FINANCIAL PLAN IS SPIRAL BOUND!!!
OTHERWISE YOU WILL RECEIVE AN F ON YOUR FINAL PROJECT!!!
Please use 1½ line spacing, normal margin settings.
42
7612_Book_p001-048.pdf 42
10/22/10 9:16 AM
Future Value of a Dollar Answers
1. $5,000 ⫻ (FV$ N = 3 K = 10) 1.3310 = $6,655
2. $5,000 ⫻ (FV$ N = 3 K = 7) 1.2250 = $6,125
3. $10,000 ⫻ (FV$ N = 2 K = 12) 1.2544 = $12,544
4. $10,000 ⫻ (FV$ N = 2 K = 9) 1.1881 = $11,881
5. $3,000 ⫻ (FV$ N = 7 K = 12) 2.2107 = $6,632
6. $3,000 ⫻ (FV$ N = 7 K = 5) 1.4071 = $4,221
7. $4,000 ⫻ (FV$ N = 30 K = 10) 17.449 = $69,796
8. $4,000 ⫻ (FV$ N = 40 K = 12) 93.051 = $372,204
9. $2,000 ⫻ (FV$ N = 30 K = 8) 10.063 = $20,126
10. $2,000 ⫻ (FV$ N = 30 K = 7) 7.6123 = $15,225
43
7612_Book_p001-048.pdf 43
10/22/10 9:16 AM
Future Value of an Annuity
Answers
1. $5,000 ⫻ (FVA: N = 3 K = 10) 3.3100 = $16,550
2. $5000 ⫻ (FVA: N = 3 K = 7) 3.2149 = $16,075
3. $10,000 ⫻ (FVA: N = 2 K = 12) 2.1200 = $21,200
4. $10,000 ⫻ (FVA: N = 2 K = 9) 2.0900 = $20,900
5. $3,000 ⫻ (FVA: N = 7 K = 12) 10.089 = $30,267
6. $3,000 ⫻ (FVA: N = 7 K = 5) 8.1420 = $24,426
7. $4,000 ⫻ (FVA: N = 30 K = 10) 164.49 = $657,960
8. $4,000 ⫻ (FVA: N = 40 K = 12) 767.09 = $3,068,360
9. $2,000 ⫻ (FVA: N = 30 K = 8) 113.28 = $226,560
10. $2,000 ⫻ (FVA: N = 40 K = 7) 199.64 = $399,280
44
7612_Book_p001-048.pdf 44
10/22/10 9:16 AM
Answers for Present Value
of a Dollar
1. $5,000 ⫻ (PV$: N = 3 K = 10) .7513 = $3,757
2. $5,000 ⫻ (PV$: N = 3 K = 7) .8163 = $4,082
3. $10,000 ⫻ (PV$: N = 2 K = 12) .7972 = $7,972
4. $10,000 ⫻ (PV$: N = 2 K = 9) .8417 = $8,417
5. $3,000 ⫻ (PV$: N = 7 K = 12) .4523 = $1,357
6. $3,000 ⫻ (PV$: N = 7 K = 5) .7107 = $2,132
7. $100,000 ⫻ (PV$: N = 30 K = 10) .0573 = $5,730
8. $100,000 ⫻ (PV$: N = 40 K = 12) .0107 = $1,070
9. $1,000,000 ⫻ (PV$: N = 30 K = 8) .0994 = $99,400
10. $1,000,000 ⫻ (PV$: N = 40 K = 7) .0668 = $66,800
45
7612_Book_p001-048.pdf 45
10/22/10 9:16 AM
Answers for Present Value
of an Annuity
1. $5,000 ⫻ PVA (N = 3, K = 10) 2.4869 = $12,435
2. $5,000 ⫻ PVA (N = 3, K = 7) 2.6243 = $13,122
3. $10,000 ⫻ PVA (N = 2, K = 12) 1.6901 = $16,901
4. $10,000 ⫻ PVA (N = 2, K = 9) 1.7591 = $17,591
5. $3,000 ⫻ PVA (N = 7, K = 12) 4.5638 = $13,691
6. $3,000 ⫻ PVA (N = 7, K = 5) 5.7864 = $17,359
7. $4,000 ⫻ PVA (N = 20, K = 10) 8.5136 = $34,054
8. $4,000 ⫻ PVA (N = 30, K = 12) 8.0552 = $32,221
9. $2,000 ⫻ PVA (N = 20, K = 10) 8.5136 = $17,027
10. $2,000 ⫻ PVA (N = 30, K = 12) 8.0552 = $16, 110
46
7612_Book_p001-048.pdf 46
10/22/10 9:16 AM
Answers for Bond Values
1a) $25,000 ⫻ PV$ (K = 5, N = 30)
.2314 = $5,785
$2,500 ⫻ PVA (K = 5, N = 30)
15.3725 = $38,431
Total: $44,216
1b) $25,000 ⫻ PV$ (K = 8, N = 30)
.0994 = $2,485
$2,500 ⫻ PVA (K = 8, N = 30)
11.2578 = $28,145
Total: $30,630
1c) $25,000 ⫻ PV$ (K = 12, N = 30)
.0334 = $835
$2,500 ⫻ PVA (K = 12, N = 30)
8.0552 = $20,138
Total: $20,973
2a) $100,000 ⫻ PV$ (K = 6, N = 10)
.5584 = $55,840
$7,000 ⫻ PVA (K = 6, N = 10)
7.3601 = $51,520
Total: $107,360
2b) $100,000 ⫻ PV$ (K = 9, N = 10)
.4224 = $42,240
$7,000 ⫻ PVA (K = 9, N = 10)
6.4177 = $44,924
Total: $87,164
2c)
$100,000 PV$ (K = 10, N = 10)
.3855 = $38,550
$7,000 PVA (K = 10, N = 10)
6.1446 = $43,012
Total: $81,562
47
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7612_Book_p001-048.pdf 48
10/22/10 9:16 AM