Math

Sheet1

Determine whether to invest, given your current cash flows.

TRUE FALSE

ERROR:#REF!
ERROR:#REF!

SUITABLE ? TYPE OF

Yes or No INVESTMENT JUSTIFICATION

ERROR:#REF!
ERROR:#REF!
ERROR:#REF!

SUITABLE ? TYPE OF

Financial Goals Yes or No INVESTMENT JUSTIFICATION
ERROR:#REF!
ERROR:#REF!
ERROR:#REF!

Name:

Date:

Chapter 14

Building Your Own Financial Plan

Goals

2. Determine what kinds of investments you should purchase to meet your financial goals.

Analysis

1. Review your cash flow statement to determine how much you can afford to invest

in stocks each month.

Click here to review your personal cash flow statement

2. Evaluate your risk tolerance to see if your temperament is suited to the

uncertainty of investments.

Risk Tolerance Quiz

Answer True or False by entering an x in the appropriate box. Be sure to

enter an x for only one box (True or False) per answer, otherwise your

results will be incorrect.

TRUE

FALSE

1. If I own stock, I will check its price at least daily if not more often.

2. When driving on an interstate, and traffic and weather permit, I never

drive in excess of the posted speed limit.

3. If the price of my stock declines, my first reaction is to sell.

4. Another stock market crash similar to 1929 could occur very unexpectedly.

5. When I fly in less than perfect weather, I tend to get nervous and concerned

about my safety.

6. If I sold a stock at a loss of more than 25%, it would greatly shake my

confidence in my ability to invest.

7. I intensely dislike blind dates.

8. When I travel, I write down a packing list to be sure that I don’t forget

anything.

9. When traveling with others, I prefer to do the driving.

10. Before buying a bond I would want to talk to at least two other people to

confirm my choice.

Score

Comment

ERROR:#N/A

Results

0-3 True: You have the risk tolerance to invest in individual common stocks.

4-6 True: You would be a nervous investor, but with more knowledge and a few successes, you could probably

raise your risk tolerance to a suitable level. Mutual funds might prove a good starting point for

your level of risk tolerance.

7-10 True: You are probably a very conservative and risk-intolerant investor who is probably better suited to a

bond portfolio.

3. Determine whether investments will help you to achieve your short, intermediate,

and long-term goals.

Complete the template below for the short-, intermediate-, and long-term goals that you have established

and reviewed throughout the course. In determining whether investing is suitable for each goal,

take into consideration the timeline for accomplishing the goal, the critical nature of the goal,

and, of course, the results of your risk tolerance test. For those goals that you determine investments

are not suitable, enter an “N” in column two, and do not complete the rest of the line for that goal.

If, however, you enter a “Y” in column two, think about the kind of investment that is appropriate

and justify your selection of stocks as a risk-appropriate means to accomplish this goal.

Short-Term

SUITABLE ?

TYPE OF

Financial Goals

Yes or No

INVESTMENT

JUSTIFICATION

ERROR:#REF!

Intermediate-

Term Financial Goals

Long-Term

Decisions

1. Summarize your reasoning for either investing or not investing to meet your goals.

2. If you decide to invest, how much will you invest each month? What types of investments will you purchase?

Why?

Sheet2

Sheet3

MyBriefcaseFlashdrive

Sheet 1 of

To Save Your Documents: Always back up your files!

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Pareto Background

, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. In the late

0s, Dr. Joseph M. Juran inaccurately attributed the

Rule to Pareto, calling it Pareto’s Principle. While it may be misnamed, Pareto’s Principle or Pareto’s Law as it is sometimes called, can be a very effective tool to help you manage effectively.

pertise. Quality Management pioneer, Dr. Joseph Juran, working in the US in the 19

0s and 40s recognized a universal principle he called the “vital few and trivial many” and reduced it to writing. In an early work, a lack of precision on Juran’s part made it appear that he was applying Pareto’s observations about economics to a broader body of work. The name Pareto’s Principle stuck, probably because it sounded better than Juran’s Principle.

As a result, Dr. Juran’s observation of the “vital few and trivial many”, the principle that 20 percent of something always are responsible for 80 percent of the results, became known as Pareto’s Principle or the 80/20 Rule.

Worksheet 2 of 7
Pareto Principle
In 1	9	6		19	4	8	20
Where It Came From
After Pareto made his observation and created his formula, many others observed similar phenomena in their own areas of e	x		3
	As a result, Dr. Juran’s observation of the “vital few and trivial many”, the principle that 20 percent of something always are responsible for 80 percent of the results, became known as Pareto’s Principle or the 80/20 Rule.
What It Means
You know 20 percent of your stock takes up 80 percent of your warehouse space and that 80 percent of your stock comes from 20 percent of your suppliers. Also 80 percent of your sales will come from 20 percent of your sales staff. 20 percent of your staff will cause 80 percent of your problems, but another 20 percent of your staff will provide 80 percent of your production. It works both ways.
How It Can Help You
The value of the Pareto Principle for a manager is that it reminds you to focus on the 20 percent that matters. Of the things you do during your day, only 20 percent really matter. Those 20 percent produce 80 percent of your results. Identify and focus on those things. When the fire drills of the day begin to sap your time, remind yourself of the 20 percent you need to focus on. If something in the schedule has to slip, if something isn’t going to get done, make sure it’s not part of that 20 percent.

Data Analysis Excel 2003

Sheet 2 of 7

Excel 2003 – Installing Data Analysis

Installing and Enabling Excel Add-Ins (Data Analysis)

Add-Ins are special programs that are designed to perform specific tasks in Excel. While Excel includes several add-ins, we will focus only on one, Data Analysis.

Data Analysis is included with all recent versions of Excel. However, if you choose to install Excel using the default options, Data Analysis has been installed during the installation process.

Even after this add-in has been installed, it needs to be enabled (or switched on) in order for it to be available in Excel. To check if this add-in has been enabled, start Excel and click Tools. If you see Data Analysis as a menu options, then the add-in has been enabled on that PC. However, if you do not see it as an add-in, then click Tools\Add-Ins.

To enable Data Analysis, make sure the boxes next to Analysis ToolPak and Analysis ToolPak-VBA are both checked. From here onward, this add-in will be available each time you start Excel on that PC. To access the add-in, simply click Tools and select the appropriate choice in the menu.

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#3 Illustration

Illustration

– Raw Data

…

Total

s #1, #2, etc.

or $*

23 0.46

= .46, etc.

Total 50 1.00
Failure Categories (or $ spent Frivolously)

Relative Cumulative Frequency

Baggage Delay 23 0.46
Poor Cabin Service 14 0.74
Missed Connection 7 0.88
Lost Baggage 4 0.96
Ticketing Error 2 1.00

Worksheet 3 of 7

Note: Sheet 1 includes directions for Excel 2007.

Table 1

Failure Categories or $ Spent Frivolously

Defect

Defect #2

…

Defect # 7

Total

Day #1

Day #2

Day

Note: If privacy is a concern, please label them as

Item

Note: Steps are directional for Apples and Excel 2007. Sheet 3 gives steps for Excel 2007

Note: Feel free to start on any day of the week.

Table 2 – Summary Data

Failure Categories (or $ spent Frivolously)

Frequency

Relative Frequency

Cumulative Frequency

Relative Cumulative Frequency

Baggage Delay

0.46

e.g., Relative Frequency = 23/

Poor Cabin Service

0.28

0.74

e.g., Cumulative Frequency = 23+14 = 37, etc.

Missed Connection

0.14

0.88

e.g., Relative Cumulative Frequency = .46+.28+.14 = .88, etc.

Lost Baggage

0.08

0.96

grav (`) control

Ticketing Error

0.04

1.00

* Remember to sort high to low

** Your study should have 7 categories.

Table 3 – Input Data to Excel

Frequency
or $

** Note that Table label and Total are excluded.

Note that the first 2 categories have RCF closest to .80.

Pareto Chart

Note: To continue with the assignment, please continue to Page 2, Project Description.

Pareto Statement:

Based on the 80/20 rule, ~ 80% of the defects are represented by 2 of the 5 categories.
Note: There will be 7 defect categories in your study. The study results will indicate the number of categories out of 7 that represent approximately 80% of your defects.

Note 1:

In the real world, there are time and cost impacts. Category #1 is not necessarily worked first.

In a related analysis, categories may be weighted by their value and then re-analyzed.

Note 2:

For this study, you data may be more uniformly distributed,

With only 7/14 days, your data may not fit the Pareto; that is OK for this assignment.

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#3Illustration

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Page &P
Problem Types
Frequency
Decimal
Pareto Analysis on Travel Problems

#4
Project Description

to avoid losing points.

s – Please specify.

Worksheet 4 of 7
Note: Please feel free to share your preliminary results with the professor up to within 3 days of the due date.
Please bring a paper copy to class and upload a copy to Sakai at least one half hour before class starts.
Note: All work is independent.
There are two options for this project. Only one of the options needs to be done.
1. Personal or Work-Related TQM (Total Quality Management) Checklist (Unit tracked = number of defects)
2. Out of Pocket Expense (Discretionary) Analysis (Unit tracked = $)
1. TQM Personal Checklist: Unit Tracked = number of defects
Choose one of the following scenarios: (A) Create your own personal checklist, containing your top 7 defects (opportunities for improvement). (B) Choose a theme (Time Management, Healthy Living, etc.). These must be from a process that you do at least once a day and be phrased as “Failure to …”. (C) Track defects from work (i.e., meet goals of responding to calls, e-mails, co-workers, etc.)
Monitor yourself for 2 weeks (or 14 weekdays), keeping track, day-by-day, of the number of times you are defective for each of your defect categories. A defect is defined as a “failure to” and would score = 1. A success would be = 0. For example, failure to get up on time, failure to exercise, etc. On worksheet Page 1-Illustration, Table 1 shows the data collection format. For Winter/Summer Session, 1 week is sufficient. Use the	Rubric
2. Out of Pocket Expense Analysis: Unit Tracked = $
From the list below*, choose 7 expense categories that best reflect you. For two weeks minimum, track your expenses (dollars) daily by at least 7 categories of your choice. Please see the data collection table below. Only one week is needed for Winter or Summer Session. Please use the Rubric to avoid losing points.
Note: These seven GREEN total value son the table below are the starting point for the Pareto project. Please remember to sort the data as input to Excel.
(A) Analyze expense categories via Excel and Pareto Analysis. A rubric provides guidance on the project.
Provide a Pareto Statement (The number of categories needed to reach approximately .80.)
(B) Discuss ways that you can reduce your expenses.
* Choose any 7 expense categories (and feel free to augment with others):
Note: Gas should not be included if you need it to get to class.
Note: Obligations such as mortgages, rent, utilities, etc. should not be included.
CDs
Clothes
Coffee
Films
Gambling
Hair products
Hobby 1, etc.
Jewelry
Liquor
Movies
Music downloads
Personal care products
Restaurants
Shoes
Snacks
Take out
Toiletries
Tobacco
Vending Machines
Video games
	Other
Do not use gas.

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#5
Detailed Steps

Frequency

Baggage Delay 23 0.46
Poor Cabin Service 14 0.74
Missed Connection 7 0.88
Lost Baggage 4 0.96
Ticketing Error 2 1.00

axis (Problem Types)

Always backup your data. See steps on adding a briefcase on MyRutgers account.

Worksheet 5 of 7

Directions for Excel 2007 and 20

Error Category

Rel. Cum. Freq.

Steps:

Set up Landscape Layout.

Step 1:

Select all data in above table. Include labels and titles

Step 2:

From ribbon, insert a line chart with markers

Step 3:

Right click on “Relative Cumulative Frequency” line on chart

Step 4:

In “Series” options, select “Secondary Axis”

Step 5:

Right click on “Frequency” line on chart

Step 6:

to Column

Step 7:

For labeling the title, x and y axes: Highlight Chart; then click on

Step 8:

Under “Chart Layouts”, you are given the option for labels on the axes and the title for the chart.

Step 9:

In SAVE the Pareto template to use again!

Step 10:

Always backup your data. See steps on adding a briefcase on MyRutgers account.

Directions for Excel 2003

Columns A, B, and C of Table 3 are the input data set, sorted high to low.

To produce a Pareto analysis, select the three columns of Table 3 (i.e., Error Category, Frequency and Relative Cumulative Frequency). Do not select the column headings.

Click on Chart Wizard (bar chart icon).

Step 1 of 4 – Choose Custom Types

Cursor down until you see “Line-Columns on 2 Axes”

Click on Next

Step 2 of 4 – Click on Next

Step 3 of 4 – Label the title (“Your Name’s” Pareto Chart)

Label the

Label the first Y axis (Frequency)

Label the second Y axis (Decimal)

Step 4 of 4 – Choose the option to place the chart as an object with the raw data

Save with a filename (“Your Name’s” Pareto Chart)

Via Page Setup, select Landscape or Portrait view; insure that no material runs onto another page.

MAC

Steps for the MAC are posted Folder #3 Assignment Related Documents under Resources on Sakai.

SQC

Any software can be used.

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#5Detailed Steps

Baggage Delay Baggage Delay
Poor Cabin Service Poor Cabin Service
Missed Connection Missed Connection
Lost Baggage Lost Baggage
Ticketing Error Ticketing Error

Decimal
Frequency
Rel. Cum. Freq.
Categories
Frequency
Your Name
23
0.46
14
0.74
7
0.88
4
0.96
2
1

#6
Rubric

Rubric

Maximum

0 Points

Item Points Lost

Table 1

are calculated.

5 Incorrect X Correct

Incorrect X Correct

0 Points 2 Points 4 Points Item Points Lost

14 Incorrect X Correct

Incorrect X Correct

0 Points

2 Points Other Points Lost

19 Incorrect X Correct

20 Incorrect X Correct

No Punctuation Errors Punctuation Errors

0 Points 4 Points

Points Lost

Correct

0 Points

8 Points

Points Lost

TBD TBD

Worksheet 6 of 7

Course Number:

Last (Family) Name:

Directions: Staple the rubric as Page 1 of the paper document. On-Line version is to be posted on Sakai at least 0.5 hour before class starts. Paper version is to be submitted at the start of the class’s deadline.

Course Section:

First (Given) Name:

0 Points

Total Points Earned:

Total

Points Lost

2 Points

4 Points

Either excludes totals or includes 1 total

Includes only two totals

Includes row, column and grand totals

Does not sort frequencies high to low

Sorts frequencies high to low

Tables 2 and 3: Appropriate data sorted high to low.

No averages are provided.

Only the row or the column average is provided.

Row and column averages provided.

Averages

Incorrect

Correct

Tables 2: Totals must be the same: either .99, 1.00 or 1.01

All 3 tables are provided and are in order. (Tables 1, 2, and 3)

2+ tables with column width issues

1 table with a column width issue

All tables have sufficient Column Widths.

2+ tables with row height issues

1 table with a row height issue

All tables have sufficient Row Heights.

2+ columns with non-centered data

1 column with uncentered data

For all tables: Column headings are centered over columns.

2+ columns with unequal decimal places

1 column with unequal decimal places

For all tables: Insure an equal number of decimal places within a column.

Included fewer than 7 categories

Includes 7 categories

Included 7 categories

7 Categories are required.

Print Preview: No tables split between pages

Excludes more than 1 label

Excludes 1 label

Includes title, labels for all axes and for defect categories

Pareto Chart: Includes title, labels for all axes and for defect categories (Title = Pareto Chart of Your Name)

3+ errors

2 errors

1 error

Overlapping Defect Category Labels and/or Legend overlapping Chart

Descending Bars, with No Total Plotted

Relative Cumulative Frequency Line Curve Ends at 1, with the legend included.

Relative Cumulative Frequency Line progressively increases.

The Number of Series = 2.

Print Preview: Chart not split between pages.

Excluded Observations

Included 1 observation

Included 2 observations

Post 2 Observations: 1 about What You Saw/Learned about Yourself during the Process and 1 on how you would reduce your defects/spending (1 paragraph each.)

1 Point

Includes copy of Rubric, stapled as Page 1 of paper submission.

No Handwritten Material/Extraneous Materials (except name and class number)

> 4 Spelling Errors

1-3 Spelling Errors

No Spelling Errors

Spell Check

> 4

Punctuation Errors

1-3

No Punctuation Errors

8 Points

Pareto Statement (place below Pareto Chart)

Missing

Incorrect / inaccurate

Included Pareto Statement “x of the 7 defect categories reflect approximately 80% of the defects.”

< ========== >

Miscellaneous

TBD

Miscellaneous: Proof Reading, Grammar, Grids, etc.

Penalty: 10% for every class that the project is late.

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#7
Project Submission

Last (Family) Name: First (Given) Name:
Averages
#1 #2 #3 #4 #5 #6 #7

Total

Total
Averages

Table 2 – Summary Data
Failure Categories (or $ spent Frivolously)

Relative Frequency Cumulative Frequency Relative Cumulative Frequency
Total

* Remember to sort high to low

** Your study should have 7 categories.
Table 3 – Input Data to Excel
Failure Categories (or $ spent Frivolously) Frequency
or $ Relative Cumulative Frequency

Pareto Statement:

Worksheet 7 of 7	Note: Please check the Rubric to avoid losing points.
Note: More than 1 page can be used for the submission.
Note: Option 1 is tracking the occurrence (frequency) of the failures; Option 2 is tracking $.
Data Collection Table 1
Date	Estimated Dollars ($) Spent
Category 1	Category 2	Category 3	Category 4	Category 5	Category 6	Category 7
Day 1
Day 2
Day 3
Day 4
Day 5
Day 6
Day 7
Day 8
Day 9
Day 10
Day 11
Day 12
Day 13
Day 14
Note: Only 7 days is needed for Winter/Summer Sessions.
Frequency or $*
Notes:
The Total in Table 1 should equal the Total in Table 2.
If Table 1 has dollars, then Tables 2 and 3 should have dollars. If Table 1 has counts, then Tables 2 and 3 should have counts.
Observation 1:
Observation 2:
Observations should be different from the Pareto Statement.
Please use the rubric as a checklist to avoid losing points.
Pareto Chart Here:

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Sheet 7

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Sheet 8

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A Step by Step Procedure to Add a Briefcase to a my.rutgers.edu site

In order to save documents that are accessible from any computer, please consider using the Briefcase option in

my.rutgers.edu

1 -Log into my.rutgers.edu

2- Click on the tab where you want the briefcase located.

3- From the tab, look all the way to the far right, in grey, where it says more options; Click this tab.

4- A screen that is a map of each tab comes up; Be sure to click the tab where you want the briefcase located

again; Look at the map and decide where you want the briefcase. Then click the “add channel” button above the

location you want the briefcase.

5 – In the next screen, there will be a #1 and a drop down menu; Select web tools and press “go”.

6 – A #2 will be added, with some choices; Click on the briefcase name and press #3; Then add channel below it in

that screen.

7 – The briefcase has been added. If you look at the location you chose, then you will see an actual briefcase that

you can open. Test it out by clicking it to open. At this point, you can either create a folder for a subject or directly

upload a document from your hard drive, flashdrive, etc. and then upload to briefcase. It will now be accessible on

any computer.

Note: At the more options site, you can rearrange the

components of your Rutgers’ site around to customize your site.

>Sheet

Name :

,000 to invest. You will learn how to monitor your stock portfolio and measure your investment performance. You will also learn about the factors that affect a stock’s performance over time. You can also access a word file from our book’s companion website at www.pearsonhighered.com/madura. You can retrieve the file and same it on your computer, so that you can make updates to the file as you complete the project.

stocks from different industries. Each stock has a ticker symbol. For example, the ticker symbol of Microsoft is MSFT. Insert the ticker symbol of the stock you select in the box that says “Get quotes”. You will see the stock price quoted, along with other financial information. Notice that the quarterly dividend is listed within the financial details, if the stock pays a dividend. The dividend quoted on the Google finance site reflects the dividend provided per quarter.

$ $ $

Last/Familiy

First/Given Name :

STOCK MARKET PROJECT

This project allows you to gain experience in making investment decision, which are a key aspect of personal financial planning. Assume that you have

The investment is $10,000 for each stock.

For your three stocks, please select any three that correspond to your initials. For example, if your name is “Currently A. Student,” then select the first stock that begins with the letter “c”; the second stock begins with the letter “a”; the third stock begins with the letter “s”.

If you do not have a middle name, select the third stock to begin with the first letter of the month in which you were born.

OBTAINING STOCK PRICE AND DIVIDEND IFORMATION

Go to Google’s financial Web site (finance.google.com) to track

ENTER THE STOCK INFORMATION

* The price per share of stock date is the first day of class. Tracking ends the week before the assignment’s due date.

Stock 1 –

Stock 2 –

Stock 3 –

NAME OF THESTOCK IN WHICH YOU WISH TO INVEST

TICKER SYMBOL OF STOCK

PRICE PER SHARE OF YOUR STOCK AT THE TIME OF PURCHASE

NUMBER OF SHARES THAT YOU PURCHASED
($10,000 DIVIDED BY THE PRICE PER SHARE OF THE STOCK)

DIVIDEND PER SHARE PAID PER QUARTER

DETERMINE YOUR GAIN OVER THE SCHOOL TERM

* Price per share of your stock is on the first day of class.

Total dollar value of your shares near the end of the school term.
This is calculated as the number of shares purchased (from #4) multiplied by the price per share of your stock near the end of the school term (from #6)

Total dollar amount of dividends received.
This is calculated as the dividend received per share (from #5) multiplied by the number of shares purchased (from #4).

Total dollars that you have at the end of the school term (# 7 + # 8).

Return on your investment = (total dollars based on #9 – $10,000/$10,000).

COMPARING YOUR STOCK TO THE GENERAL MARKET

Go to Google’s Financial web site (finance.google.com) and enter your stocks in the “Get quotes” box. A common benchmark used to measure general stock market conditions is the S&P 500 index. After you click 3m in the stock price charts in order to review a 3-month period, check the small S&P 500 box just above the chart. This allows you to compare the performance of your 3 stocks to the stock market in general. Answers must be substantiated.

Did your stocks move in the same direction as the market for most of the school term? Please justify.

Did your stocks perform better or worse that the market in general? Please justify.

Sheet2

Sheet3

Chapters 11, 14 and 16 (Submit ONLY the answer sheet)

Problems

Point

Chapter 11: Auto and Homeowner’s Insurance

CH11.1. Car Accident. What steps should you take if you are in a car accident? (Mention 5 instances)

Chapter 14: Investing Fundamentals

CH14.1.a. Return on Stock. Joel purchased 100 shares of stock for $35 per share. During the year, he received dividend checks amounting to $160. Joel recently sold the stock for $42 per share. What was Joel’s return on the stock?

CH14.1.b. Capital Gains Tax. Joel is in a 25 percent tax bracket. What amount of taxes will he pay on his capital gain if he held the stock for less than a year?

CH14.1.c. Capital Gains Tax. How much would Joel pay for tax if he held the stock for more than a year, assuming he sold it for the same amount? (Long term capital gain)

CH14.1.d. Capital Gains Tax. How much would Joel save in taxes if he held the stock for more than a year, assuming he sold it for the same amount? (Savings)

CH14.2. Value of Investment. Tammy has $5,500 that she wants to invest in stock. She believes she can earn a 11 percent annual return. What would be the value of Tammy’s investment in 13 years if she is able to achieve her goal?

CH14.3. Value of Investment. Dawn decides to invest $4,000 each year in stock at the end of each of the next six years. She believes she can earn a 9 percent return over that time period. How much will Dawn’s investment be worth at the end of six years?

CH14.4. Value of Investment. Bob purchased a dot-com stock, which was heavily advertised on the Internet for $35 per share shortly after the stock’s IPO. Over the next three years, the stock price declined by 17 percent each year. What is the company’s stock price after three years?

CH14.5.a. Value of Investment. Floyd wants to invest the $17,000 he received from his grandfather’s estate. He wants to use the money to finance his education when he pursues his doctorate in five years. What amount will he have in five years if he earns a 8 percent return?

CH14.5.b. Value of Investment. From CH14.5.a, if he receives a 11 percent return?

CH14.5.c. Value of Investment. From CH14.5.a, if he receives a 13 percent return?

CH14.6.a. Value of Investment. Morris will start investing $3,500 a year in stocks. He feels he can average a 10 percent return. If he follows this plan, how much will he accumulate in 4 years?

CH14.6.b. Value of Investment. From CH14.6.a, how much will he accumulate in 8 years?

CH14.6.c. Value of Investment. From CH14.6.a, how much will he accumulate in 9 years?

CH14.7. Capital Loss. Charles just sold 500 shares of stock A for $15,000. In addition, he just sold 650 shares of stock A for $6,500. Charles had paid $20 per share for all his shares of stock A. What amount of loss will he have, assuming both sales were on stocks held for more than one year?

Chapter 16: Investing in Bonds

CH16.1. Tax Consequences. Bonnie paid $9,500 for corporate bonds that have a par value of $12,000 and a coupon rate of 9 percent, payable annually. Bonnie received her first interest payment after holding the bonds for 12 months and then sold the bonds for $9,800. If Bonnie is in a 35 percent marginal tax bracket for federal income tax purposes, what are the tax consequences of her ownership and sale of the bonds?

CH16.2. Tax Consequences. Katie paid $9,600 for a Ginnie Mae bond with a par value of $10,000 and a coupon rate of 8.5 percent. Two years later, after having received the annual interest payments on the bond, Katie sold the bond for $9,900. What are her total tax consequences if she is in a 25 percent marginal tax bracket? (Hint: Interest: Ordinary income tax & Capital gain: Long-term tax)

CH16.3 Risk Premium. Sandy has a choice between purchasing $5,000 in Treasury bonds paying 6 percent interest and purchasing $5,000 in BBrated corporate bonds with a coupon rate of 9.2 percent. What is the risk premium on the BBrated corporate bonds?

Obtain Free Copy of Your Credit Report

Create and enclose your own credit monitoring service by getting a free copy of your credit report from AnnualCreditReport.com, the only authorized site under federal law. Submit either page 1 or an e-mail confirmation of the report, with no personal information (i.e., no Social Security Number, no personal data, etc.). If you do not have credit history or the system cannot process your credit report, enclose the error message.

Life Expectancy Project

Fill out the form and answer the following question on the form.

What can you do to try to increase your life expectancy based on the 3 biggest negative factors that you have going for you?

Take Home Exam #3: Chapters 11, 14 and 16 Page 4 of 4

Chapters 11, 14 and 16 (Submit ONLY the answer sheet)

Point

Chapter 11: Auto and Homeowner’s Insurance

Chapter 14: Investing Fundamentals

Chapter 16: Investing in Bonds

All work must to be submitted on-line one half hour before class on the assignment due dates. Merely posting final answers is insufficient.
Last/Family Name:	First/Given Name:	RU ID:	Signature:
Formulae and Solutions	Final Answer	DED Grade
CH11.1.
CH14.1.a.
CH14.1.b.
CH14.1.c.
CH14.1.d.
CH14.2.
CH14.3.
CH14.4.
CH14.5.a.
CH14.5.b.
CH14.5.c.
CH14.6.a.
CH14.6.b.
CH14.6.c.
CH14.7.
CH16.1.
CH16.2.
CH16.3.
Point Deducted	50
Score Earned for #3

Gary Grandview – A continuing Case – Part 4

Protecting Your Wealth

Gary’s company updates its benefit package annually. During this open enrollment time, employees have the option to upgrade or make changes to their insurance and benefit coverage. To help the employees understand the programs being offered, the company has brought in several insurance consultants to explain the different policies and how each policy could benefit the employees. While listening to the consultants, Gary decides to look into his auto and life insurance policies.

Gary mentions that he is generally happy with the HMO insurance plan he has through the technology company where he works. However, Gary also mentions that he does not particularly like to see his primary care physician each time he requires a consultation with a specialist. He tells you that his company also offers a PPO, but he did not choose that plan because he knows so little about PPOs.

Gary becomes concerned about his auto insurance after hearing a co-worker recently had his car totaled by an uninsured motorist. Gary has not looked at his auto insurance policy since he purchased it two years ago. Gary discovers that selecting insurance coverage is harder than he originally anticipated.

Gary’s current policy covers just the basics at the minimum required levels allowed by law. There are so many types of insurance that he becomes confused and needs some advice. Recall that Gary is 25 years old, has a driving record that contains several speeding tickets, a couple of parking tickets and two accidents (one of which he caused). Gary realizes that adding coverage will increase the cost of his auto insurance. Therefore, he is thinking about switching auto insurance companies to a less expensive carrier. The agent notices that Gary commutes 17 miles to work. The agent mentions in passing that Gary could save $200 in insurance payments if his commute to work was 12 miles or less. This gets Gary to thinking about saving in other areas. Less mileage means less gas; he could save a tank of gas per month if he moved closer to where he works. Moving is a lot of work, and he likes where he lives now.

When you ask Gary whether he has renter’s insurance, it is obvious that he does not know what renter’s insurance is.

Gary is trying to decide between term life insurance, universal life and whole life insurance. He likes whole life insurance, and he believes that the loan feature on that policy will give him an option for meeting his liquidity needs.

Gary Grandview Part 4 Reading Segment Revised 3.6.2013 – SL_ML_SL2

>BB-

4 Name:

Grandview—A Continuing Case

-4. Continue to assume the role of Gary’s advisor and provide your answers in a business like style and ton

(*Excel Toolbar, Home Tab, Alignment section)

Drag the bottom line of the number row (far left column) down, or

Insert a row while inside the yellow text box.

4
2

factors.

2
2

Name:

Date:

Gary

Part 4: Protecting Your Wealth

Read Gary Grandview Part 4. Analyze the changing facts provided in Parts

Please make sure that WRAP TEXT and MERGE and CENTER are ON.

Ensure your answers can be seen in the yellow highlighted text box. Need more space? Increase height of the text box.

Ensure printed copies are readable. Print in Portrait. Always print preview.

Save and upload the document in the Assignments Folder. Then print a copy for class.

Case Questions

Value of Points

Possible

Lost

Why should auto insurance be important to Gary?

Gary is trying to decide on which type of auto insurance coverage he should have.

Explain the four types of auto insurances that are available.

Which of these policies are best for Gary’s situation and why?

Gary would like to know the difference between on-line and brand name insurance companies.

What major factors affecting auto insurance rates should Gary consider if he switches insurance companies? Please specify

Should Gary need to know if he should consider the credit rating of the insurance company? Yes/No, and please justify.

Gary currently rents an apartment. Should Gary budget for renter’s insurance?

What is the difference between renter’s insurance and homeowner’s insurance?

What determines whether renter’s insurance is appropriate for Gary?

Gary’s company benefit package is coming up for renewal. Gary currently has a PPO plan at his job and needs to decide if he should keep the PPO plan or change a HMO plan.

What are two benefits of a PPO plan?

What are two negative factors of a PPO plan?

What are two benefits of a HMO plan?

What are two negative factors of a HMO plan?

e. Consider Gary’s cash flow situation: is a PPO plan or an HMO plan better? Yes/No, and please justify.

Gary is looking into life insurance.

Does Gary need life insurance? Yes/No and explain why.

If he needs life insurance, is whole life his best choice? Yes/No, and please justify.

Should Gary plan to use the whole life policy’s loan feature as a means for maintaining liquidity? Yes/No, and please justify.

Should Gary consider a Universal Life Insurance policy? Yes/No, and please justify.

If Gary decided on a beneficiary, how much insurance should he purchase?

If Gary decides to get married, how much life insurance should he buy?

Final Score

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Gary Grandview —A Continuing Case

This is a continuing 6 part practical application of the material learned in class.

Each part of the Continuing Case study has a reading assignment document and a homework document.

Utilize the all information provided to you. Read the Case and answer the questions in the coordinating Gary Grandview Excel file.

As you progress through the sequential parts, the financial information will be updated.

Analyze the material and give Gary advice from the perspective as his financial analyst. Give Gary advice on items he may or might not have previously considered.

Answers are to be provided using proper grammar and in business language tone.

Gary Grandview — Part 1

Gary is a 25 year old single male who graduated from college a few years ago. Gary has been working as a computer specialist for an ‘up and coming’ company for the past 3 years. Gary has an active lifestyle. He enjoys going out with friends during the week and getting out of the city at least once per month to relax and go camping. Gary’s favorite camping spot is on the shores of Lake Oswego approximately 40 miles from where he lives.

Gary received a raise last year and now earns a gross income of $48,000 per year. Gary’s tax return revealed that he paid $3,672.00 in FDIC payroll taxes [$696.00 in Medicare and $2976.00 in Social Security] and contributed $4,680.00 toward his medical benefits. Gary has college loan payments of $320.00 per month on $32,000 student loans (Current balance 16,880.00). Gary’s receives his paychecks by automatic deposit and does not always pay attention to the balance in his checking account.

Gary is renting a 2 bedroom apartment in a building that the owner is considering converting into Condominium Complex. Two years ago Gary purchased a new red 4 wheel drive pick-up for $24,300 ($ 18,500 Blue Book value) and his payments are $358.00 per month. The pickup has a current loan balance of $18,200.00, and pays $325.00 per month in auto insurance coverage.

Where Gary currently resides, there is no public transportation available, therefore he commutes to work each day. Traffic is heavy getting into the city therefore the drive to work often takes Gary 35 – 45 minutes. Gary likes his pickup and is impressed that it gets 17 miles to the gallon.

Gary has some decisions to make and comes to you (his new best friend and financial analyst) for some advice. His spending is a little out of control and asks your help in creating a budget he can live with. You discover that Gary has a few other monthly expenses that Gary forgot to mention and need to be included in his monthly budget:

Rent 850.00

Renter’s insurance 50.00

Utilities (gas and electric) 110.00

TV, Internet, & House phone 120.00

Cell phone (personal calls) 225.00

Food (consumed at home) 200.00

Clothes 170.00

Car expenses (gas, maintenance) 254.00

Camping 325.00

Entertainment (dining out, golf, weekend trips) 400.00

Gary is surprised at how much money he is spending on living costs. He admits that when he is short on cash he uses his credit card and has accumulated a balance of $8,600.00. Gary also admits that sometimes he has a hard making the $200.00 credit card payments on time.

Gary currently has $2,110.00 in his checking account and $490.00 in his savings account. His bank requires automatic deposits to maintain a free checking account. He has household furnishings valued at $2,700.00, $2,500.00 in speculative Green Planet Technology Stock and a small ten year $500.00 municipal bond he received from his mother upon graduation.

Gary has a few concerns he would like you to consider regarding his payments. Gary’s credit card payment, student loan and rent are all due on the first of the month. Gary wants to retire when he is 50. Gary knows he should start investing in a retirement plan; however he feels he cannot afford it even though his employer offers a matching fund up to $3,600 per year. Gary thinks he should be able to afford to start investing in the retirement fund in 5 years. Gary is confident he will be able to retire as planned if he invests $300 per month.

>Part

Analytic Problems

Name:

Read the coordinating Word Document on Gary. Assume the role of Gary’s financial advisor. Apply the facts and provide analytical answers. Note: Part 1 should be considered while analyzing Parts 2-6.

Tab, Alignment section)

Drag the bottom line of the number row (far left column) down, or

Insert a row while inside the yellow text box.

Print in Portrait.

Flow Statement

Cash Inflows

.00

expenses ( gas & maintenance )

$0.00 2

Cash

$0.00 2

Home
Car

$0.00 2

$0.00

$0.00 1

$0.00 2

2
b)

Advantage:

Disadvantage:
1

of an Annuity

Future Value $0.00 2
6)

Payment per Period
Number of Periods
Interest Rate per year 7.00%
Future Value $0.00 2

Future Value of an Annuity
Payment per Period
Number of Periods
Interest Rate per year 7.00%
Future Value $0.00 2

a) 2
b) 2
c) 2
a)

2
Total

Name:

Date:

Gary Grandview — A continuing Case — Part 1

Tools for Financial Planning

This is a continuing case (Parts 1 –

Please make sure that WRAP TEXT and MERGE and CENTER are ON. (*Excel Toolbar,

Home

Ensure your answers can be seen in the yellow highlighted text box. Need more space? Increase height of the text box.

Ensure printed copies are readabl

Save and upload the document in the In Box. Print a copy for class.

Case Questions

Value of Points

Possible

Deducted

Gary Grandview’s Personal

Cash

Monthly Cash Inflow

Disposable Income ( After Taxes )

Total

Monthly Cash Outflow

Rent

Renter’s Insurance

Utilities (gas and electri

TV, Internet, & House phone

Cell Phone ( personal calls )

Food (Consumed at home)

Clothes

Car

Vehicle Payment

Vehicle Insurance Payment

Entertainment

Total Cash Outflows

Net Cash Flows

Gary’s Personal Balance Sheet

Assets

Checking account

Savings account

Other liquid assets

Total liquid assets

Household Assets

Furniture

Total household assets

Investment Assets

Stocks

Bonds

Mutual Bonds

Other investments

Total investment assets

Total Assets

Liabilities

Current Liabilities

Loans

Credit card balance

Other current liabilities

Total current liabilities

Long-Term Liabilities

Mortgage

Car loan

College Loans

Total long-term liabilities

Total Liabilities

Net Worth

(Total Assets – Total Liabilities)

Analyze Gary’s expenditures. Offer Gary specific recommendations on how to

adjust his budget to achieve the following.

A positive cash flow (minimum point is to break even).

Pay off his debt.

Save $3,600 per year for retirement.

What are three advantages and three disadvantages of Gary having a credit card?

Advantage:

Disadvantage:

Advantage:

What additional goals do you think Gary should consider in the short term,

intermediate and long term. What would change if Gary were to marry in 2 years?

Assuming that Gary has an employer matching fund plan and invests the $7,200 ($300 per month plus the matching fund) per year for 20 years, and begins investing five years from now, how much will be in fund in 25 years if Gary is able to invest at 7% per year?

Future Value

Payment per Period

Number of Periods

Interest Rate per year

7.00%

Compare the alternative of investing $7,200 every year for 25 years beginning today.

(Again assume a 7 percent annual return.)

Future Value of an Annuity

Consider Gary’s plan in the question 6. Is Gary’s plan to retire in 25 years realistic? Will the plan provide an adequate income during Gary’s retirement years estimating he will live for another 30 to 40 years? If not, provide Gary with a revised fund goal. Are there any other future factors Gary should consider when revising his retirement plan?

Develop three suggestions that could help Gary reduce his income tax exposure.

The entire matrix must be completed.

Suggestions to Reduce Taxes

Why is this an advantage?

Consider Gary’s debt. Would any of your financial planning

recommendations change if he were 45 and still single?

If he were 60? Why or why not?

10)

After you informed Gary of his negative monthly net cash flow, Gary indicated

that he may delay paying his credit card bills for a couple months to reduce his cash

outflows. What are some consequences of non-payment of debts?

Final Score

Sheet2

Sheet3

Chapters 3, 4 and 5 (Submit ONLY the answer sheet.

Last Name: First Name:

Problems

Point

Chapter 3: Applying Time Value Concepts

CH3.1.

Future Value. You invest $800 at 10% rate of annual return for 12 years. How much will you have at the end of the 12-year period?

CH3.2.

Present Value. You want to begin a college fund for your new born child; you hope to accumulate $45,000 by 18 years from now. If a current investment opportunity yields 6 percent annually, how much must you invest in a lump sum to realize the $45,000 when needed?

CH3.3. Future Value of Annuity. You plan to retire after 20 years. To provide for that retirement, you initiate a savings program of $8,500 per year in an investment yielding 8 percent annually. What will the value of the fund be at the beginning of the retirement time?

CH3.4.

Present Value of Annuity. You are entering into a contract that will provide you with an income of

$25

00 at the end of the year for the next 10 years. If the annual interest rate is 8 percent, what is the present value of that stream of payments?

CH3.5. Future Value. Kyle has $2500 in cash received in graduation gifts from various relatives. He wants to invest in a certificate of deposit (CD) so that he will have a down payment on a car when he graduates from college in 4 years. His bank will pay 6% for the 4-year CD annually. How much will Kyle have in 4 years to put down on his car?

CH3.6. Future Value. Luis wants to know how much he will have available to spend on his trip to Belize in 2 years if he deposits

500 today at an interest rate of 8%.

CH3.7. Future Value of Annuity. Michelle is attending college and has a part-time job. Once she finishes college, Michelle would like to relocate to a metropolitan area. She wants to build her savings so that she will have a “nest egg” to start her off. Michelle works out her budget and decides she can afford to set aside $160 per month for savings. Her bank will pay her 12% annually on her savings account. What will Michelle’s balance be in 2 years?

CH3.8.a. Future Value of Annuity. Twins Jessica and Joshua, graduated from college and started working in the family restaurant business at age 25. The first year, Jessica began putting $3500 per year in an individual retirement account and contributed to it for a total of 10 years. After 10 years, she made no further contributions until she retired at age 65; the account pays interest on her 10 years contribution with annual 10% rate until her retirement.

Joshua did not start making contributions to his individual retirement account until he was 35, but he continued making contributions of $2600 each year until he retired at age 65. Assuming that both Jessica and Joshua received 10% interest per year. How much did Jessica contribute in total?

CH3.8.b. How much did Joshua contribute in total?

CH3.8.c. How much will Jessica have at retirement?

CH3.8.d. How much will Joshua have at retirement?

CH3.9. Estimating the Annuity Amount. Amy and Vince want to save $9,000 so that they can take a belated honeymoon trip to Europe in 4 years and 2 months. How much must they save each month to have the money they need if they can get 12% annually on their savings?

Chapter 4: Using Tax Concepts for Planning

CH4.1. Capital Gains Tax. Stuart is in the 25% tax bracket. Recently, he sold stock that he had held longer than a year for a gain of $40,000. How much tax will Stuart pay on this gain?

CH4.2. Deductions. Emily and Paul are married and file a joint return. The standard deduction for their filing status is

,900. They have the following itemized deductions:

Medical Bills about the 7.5% limit $ 600

Interest expense $4500

State income taxes $2500

Miscellaneous deductions $ 350

Should Emily and Paul itemize their deductions or use the standard deduction?

CH4.3. Itemized Deduction. Emma’s adjusted gross income is $30,000. She has $2200 in unreimbursed medical expenses. How much in medical expenses can Emma claim as an itemized deduction?

CH4.4. Impact on Taxes. Daniel has a marginal tax rate of 15%. He suddenly realizes that he neglected to include a $2000 tax deduction. How will this oversight affect his taxes?

CH4.5. Impact on Taxes. If Daniel (from CH4.4) had forgotten a $2000 tax credit (instead of a $2000 tax deduction), how would his taxes be affected?

Chapter 5: Banking and Interest Rates

Answer CH5.1, CH5.2, and CH5.3, questions according to the next page table

CH5.1. Selecting a Bank. Julie wants to open a bank account with $75. Julie estimates that she will write 20 checks per month and use her ATM card at the home bank. She will maintain a $200 balance. Which bank should Julie choose?

CH5.2. Selecting a Bank. Veronica plans to open a checking account with her $1200 tax refund check. She believes she can maintain a $500 minimum balance. Also, she estimates that she will write 10 checks per month and will use other banks’ ATMs as many as 15 times per month. Which bank should Veronica choose?

CH5.3. Check Writing Fees. Randy, a student, has $500 to deposit in a new checking account, but Randy knows he will not be able to maintain a minimum balance. He will not use an ATM card, but will write a large number of checks. Randy is trying to choose between the unlimited check writing offered by

South Trust Bank

and the low

per check

fee offered by

Sun Coast Bank

. How many checks would Randy have to write each month for the account at South Trust Bank to be the better option?

CH5.4. Checking Account Balance. Paul has an account at St. Jerome Bank. He does not track his checking account balance on a checkbook register. Yesterday evening, he placed 2 checks in the mail for $187.66 and $238.94. Paul accesses his account online and finds that his balance is $538.40, and all the checks he has written except for the 2 checks from yesterday have cleared. Based on his balance, Paul writes a check for a new stereo for $245.00. Paul has no intention of making a deposit in the near future. What are the likely consequences of his actions?

CH5.5.a. Adjusted Bank Balance. Mary’s last bank statement showed an ending balance of $175.51. This month, she deposited

$400

in her account and withdrew a total of $239.00. Furthermore, Mary wrote a total of 5 checks, 2 of which have cleared. The 2 checks that have cleared total $143.00. The 3 remaining checks total $106.09. Mary pays no fees at her bank. What is the balance shown this month on Mary’s bank statement?

CH5.5.b. What is the adjusted bank balance?

CH5.6.a. Selecting a CD. Casey has

$100

0 to invest in a certificate of deposit. Her local bank offers her 4.3% on a 12-month FDIC-insured CD. A nonfinancial institution offers her 8.4 % on a 12-month CD. What is the risk premium?

CH5.6.b. What else must Casey consider in choosing between the 2 CDs?

Free

$1.25

N/A

Hillsboro Bank	First National	South Trust Bank	Sun Coast Bank
ATM Charges
Home bank				Free
Other bank	4 free then $2 per use		$1.25	$1 .25
Checking
Minimum deposit	$100	$25		$1
Minimum balance required to avoid fees*			N/A	$400
Monthly fees	$6	$7	$13	$2.5
Check-writing charges	12 free, then $1 per check	7 free, then $1 per check	Unlimited	Each check 50 cents

Take Home Exam_1-4-02-14-2013 Page 1 of 5

Point

Chapter 3: Applying Time Value Concepts

Chapter 4: Using Tax Concepts for Planning

Chapter 5: Banking and Interest Rates

Take Home Exam #1: Chapters 3, 4 and 5 (Submit ONLY the answer sheet)
All work must to be submitted on-line one half hour before class on the assignment due dates. Merely posting final answers is insufficient.
By signing below, I acknowledge that I have read and fully understand the instructions and the Academic Integrity Policy.
Last/Family Name:	First/Given Name:	RU ID:	Signature:
Formulae and Solutions	Final Answer	DED Grade
CH3.1.
CH3.2.
CH3.3.
CH3.4.
CH3.5.
CH3.6.
CH3.7.
CH3.8.a.
CH3.8.b.
CH3.8.c.
CH3.8.d.
CH3.9.
CH4.1.
CH4.2.
CH4.3.
CH4.4.
CH4.5.
CH5.1.
CH5.2.
CH5.3.
CH5.4.
CH5.5.a.
CH5.5.b.
CH5.6.a.
CH5.6.b.
Point Deducted	50
Score Earned #1

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Data Analysis Excel 2003

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