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Copyright, iv
Boxed Features, xiii
Preface, xv
1. The Basic Framework: Organizing and Managing Your Financial Resources, 1
1. Financial Planning: Why It’s Important to You, 2
Why Study Personal Finance?, 3
Achieving Financial Goals Through Planning, 7
Making Financial Decisions, 11
The Building Blocks of Success, 12
Key Terms, 14
Follow-Up On the Steele Family, 14
Problems and Review Questions, 14
Case 1.1 The Haggertys’ Financial Planning, 15
Case 1.2 Lou Pirella and Vicki Wright: Two College Students, 16
Marie Wilson Goal-Planning Exercise Setting Goals, 16
Working Out on the Web, 18
Appendix 1.1 A Closer Look at Career Planning, 18
2. The Time Value of Money: All Dollars Are Not Created Equal, 21
Compounding (Finding Future Values), 22
Discounting (Finding Present Values), 26
Goal Planning for the Steeles, 31
Key Terms, 37
Follow-Up on the Steele Family, 37
Problems and Review Questions, 38
Case 2.1 Judy Shipley Plans for the Future, 39
Case 2.2 The Rohrbachs Plans for Retirement, 39
Marie Wilson Goal-Planning Exercise Preparing a Savings Schedule, 40
Working Out on the Web, 43
Appendix 2.1. Interpolation Techniques, 44
3. Financial Statements and Budgets: Where are You Now and Where are You Going?, 46
The Balance Sheet, 47
The Income Statement, 52
Evaluating Past Financial Performance, 53
Achieving Goals Through Budgeting, 60
Key Terms, 70
Follow-Up on the Steele Family, 70
Problems and Review Questions, 71
Case 3.1: Can Arnold and Sharon Afford a Vacation Condominium?, 73
Case 3.2: The Terrels’ Budget for 2006, 74
Marie Wilson Goal-Planning Exercise Preparing a Budget, 75
Working Out on the Web, 77
4. Taxes The Government’s Share of Your Rewards, 79
Determining Your Federal Income Tax, 80
Other Aspects of the Federal Income Tax, 92
Planning to Reduce Your Income Taxes, 99
Other Important Taxes, 102
Key Terms, 106
Follow-Up on the Steele Family, 107
Problems and Review Questions, 107
Case 4.1: Preparing Becky Sell’s First Tax Return, 108
Case 4.2: The Brittens’ Investment Alternatives, 108
Working Out on the Web, 109
2. Liquidity Management: Managing Current Assets and Current Liabilities, 110
5. Cash Management: Funds for Immediate Needs, 112
Meeting Cash Needs, 113
Using Your Checking Account, 117
Understanding how your Account Earns Interest, 127
Cash Management Strategy, 129
Key Terms, 130
Follow-Up on the Steele Family, 131
Problems and Review Questions, 131
Case 5.1: Mark’s First Checking Account, 132
Case 5.2 Choosing Liquid Accounts for Marcia and Philip Helm, 133
Working Out on the Web, 134
6. Short-Term Credit Management: Consumer Credit, 135
Arranging and Using Credit, 136
Sales Credit, 141
Cash Credit, 153
Obtaining Credit and Resolving Credit Problems, 157
Key Terms, 164
Follow-Up on the Steele Family, 165
Problems and Review Questions, 165
Case 6.1 Helen’s Debt Repayment Choices, 166
Case 6.2 Evaluating Nancy Tai’s Revolving Account, 166
Working Out on the Web, 167
3. Buying Now and Paying Later: Managing Your Long-Term Liabilities, 169
7. Consumer Durables: The Personal Auto, 170
Major Household Purchases and the Electronic Market, 171
Selecting an Automobile, 176
The Costs of Owning and Operating an Automobile, 179
The Leasing Alternative, 182
What If You Bought a Lemon?, 188
Key Terms, 190
Follow-Up on the Steele Family, 190
Problems and Review Questions, 190
Case 7.1 Ann Barnard Considers Alternative Holding Periods, 191
Case 7.2 The Reeds Examine the Lease/Buy Decision, 191
Working Out on the Web, 192
8. Housing: The Cost of Shelter, 193
Rent or Buy?, 195
The Real Estate Transaction, 204
Financing the Purchase, 211
Key Terms, 220
Follow-Up on the Steele Family, 221
Problems and Review Questions, 221
Case 8.1: How Much House Can Kim and Dan Bergholt Afford?, 222
Case 8.2: Should the Bergholts Choose the Rental Option?, 222
Working Out on the Web, 223
4. Investing for the Future: Growing Your Financial Resources, 225
9. Financial Markets and Institutions: Learning the Investment Environment, 226
Goals and Investment Alternatives, 227
Securities Markets, 232
Regulation of the Securities Industry, 234
Using the Services of a Stockbroker, 237
Finding Investment Information, 243
Key Terms, 247
Follow-Up on the Steele Family, 247
Problems and Review Questions, 247
Case 9.1: Rose Geisler’s Investment Plan, 248
Case 9.2: Should the Delaneys Open a Margin Account?, 248
Working Out on the Web, 249
10. Investment Basics: Understanding Risk and Return, 250
Risk and Return, 251
The Rewards of Diversification, 255
Applying a Risk-Return Model, 258
Building and Changing a Portfolio, 262
Key Terms, 266
Follow–Up On The Steele Family, 266
Problems and Review Questions, 267
Case 10.1: Selecting Stocks for Bart Parks, 268
Case 10.2: Arlene Elton Considers Dollar Cost Averaging, 268
Working Out on the Web, 269
11. Stocks and Bonds: Your Most Common Investments, 270
An Overview of Common Stocks, 271
Fundamental Analysis of Common Stocks, 276
Corporate-Issued Bonds, 282
Government-Issued Bonds, 284
Return and Risk Characteristics of Bonds, 287
Preferred Stock, 291
Key Terms, 293
Follow-Up on the Steele Family, 294
Problems and Review Questions, 294
Case 11.1 Ed Driessen’s Stock Pick, 296
Case 11.2 Brendan Hoyt Speculates About Bonds, 298
Working Out on the Web, 298
12. Mutual Funds and Other Pooling Arrangements: Simplifying and (Maybe) Improving Your Investment Performance, 300
Mutual Funds, 301
Other Pooling Arrangements, 309
Constructing and Maintaining Your Personal Portfolio, 315
Key Terms, 320
Follow-Up on the Steele Family, 320
Problems and Review Questions, 321
Case 12.1: The Byron’s Search for a Mutual Fund, 322
Case 12.2: Evaluating Cliff Swatner’s Portfolio, 323
Working Out on the Web, 323
5. Protecting Your Wealth: Insurance and Retirement Planning, 325
13. Property and Liability Insurance: Protecting Your Lifestyle Assets, 326
Fundamental Insurance Concepts, 327
Homeowners’ Insurance, 330
Automobile Insurance, 342
Key Terms, 350
Follow-up on the Steele Family, 351
Problems and Review Questions, 351
Case 13.1 A Fire at the Pages’, 352
Case 13.2 After the Accident, 353
Working Out on the Web, 353
14. Health Care and Disability Insurance: Protecting Your Earning Capacity, 355
Health Care Insurance, 356
Employment-Related Health Care Insurance, 363
Disability Income Protection, 369
Key Terms, 376
Follow-Up on the Steele Family, 377
Problems and Review Questions, 377
Case 14.1: The Hurleys Compare Disability Insurance, 378
Case 14.2: Evaluate Walter Simon’s Health Care Coverage, 378
Working Out on the Web, 379
15. Life Insurance and Estate Planning: Protecting Your Dependents, 380
Estimating Your Life Insurance Needs, 381
The Special Language of Life Insurance Policies, 389
Kinds of Insurance Protection, 391
Selecting the Right Policy, 399
Estate Planning, 404
Key Terms, 411
Follow-Up on the Steele Family, 412
Problems and Review Questions, 412
Case 15.1 The Wright Family Maintenance Fund, 413
Case 15.2 Costing a Cash Value Policy, 413
Working Out on the Web, 413
16. Retirement Planning: Planning for Your Long-Term Needs, 415
Saving and Investing for Retirement, 417
Establishing a Personal Retirement Plan, 434
Key Terms, 443
Follow-Up on the Steele Family, 443
Problems and Review Questions, 443
Case 16.1: Steve Deutsch Plans for Retirement, 444
Case 16.2: Janet Myrnic Considers Changing Jobs, 444
Working Out on the Web, 444
Time-Value-of-Money Concepts, 446
Future Value of a Single Payment, 446
Future Value of a Stream of Equal Payments (An Annuity), 448
Present Value of a Single Payment, 450
Present Value of a Stream of Equal Payments (An Annuity), 450
Glossary, 453
Index, I-1-1

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