a. create a financial plan of action.
b. develop financial goals.
c. evaluate and revise your actions.
d. determine your current financial situation.
_____10. You need a place to live. You have determined that you can continue to rent an apartment,
move in with your parents, look at buying a condominium or look at buying a house. This
is an example of which step in the financial planning process?
a. Determining your current financial position
b. Developing financial goals
c. Identifying alternative courses of action
d. Evaluating alternatives
_____11. You want to budget your money so that you can see a movie once a month. This is an
example of:
a. A consumable products financial goal
b. A durable goods financial goal
c. An intangible goal
d. A long term financial goal
1- 10
Copyright © 2018 McGraw-Hill Education Ltd. All Rights Reserved.
Instructor’s Manual for Kapoor et al. Personal Finance 7CE.
_____12. Economics refers to
a. setting personal financial goals.
b. planning future financial security.
c. changes in prices due to supply and demand.
d. the study of wealth.
_____13. Career planning is the part of the __________ component of financial planning.
a. obtaining
b. sharing
c. saving
d. planning
_____14. Financial strategies refer to
a. the process of predicting your future financial situation.
b. courses of action to achieve financial goals.
c. resources an individual has available for investing.
d. ideas or principles that are considered correct, desirable, or important.
SUPPLEMENTARY LECTURE
Financial Planning Through the Ages
People in their 20s-30s should
• start saving regularly and invest for the long haul for retirement, children’s education, or a down
payment on a house.
• make contributions to tax-deductible retirement plans.
• create a diversified portfolio of common stock.
• have adequate health and property insurance, however, consider going without life insurance if they
have no dependents.
People in their 40s-50s should
• maximize contributions to tax-advantaged retirement plans.
• plan for adequate funds for children’s college education.
• use stocks and stock funds for the largest share of long-term investments.
• review life, health, and home insurance for adequate coverage.
People 50-plus should
• not feel they have to preserve all their wealth for others.
1- 11
Copyright © 2018 McGraw-Hill Education Ltd. All Rights Reserved.
Instructor’s Manual for Kapoor et al. Personal Finance 7CE.
• be careful about retiring too young and not have adequate funds for what may be 30 more years.
• maintain earnings potential with a part-time job after retirement.
• not put all funds in fixed-income securities such as bank accounts and bonds.
• consider a long-term care insurance policy.
ANSWERS TO CONCEPT QUESTIONS, OPENING CASE QUESTIONS, FINANCIAL
PLANNING PROBLEMS, FINANCIAL PLANNING ACTIVITIES, AND LIFE
SITUATION CASE
CONCEPT QUESTIONS
Concept Check 1-1
1. What steps should we take in developing our financial plan?
Every decision involves identification of the basic problem, generation of alternative courses of
action, consideration of personal, social, and economic factors that influence the decision, evaluation
of alternative courses of action, selection of the most appropriate one, and implementation of the
course of action selected.
2. What are some risks are associated with financial decisions?
Common risks associated with financial decisions include inflation risk, interest-rate risk, economic
risk, and personal risk (Exhibit 1-2).
3. What are some common sources of financial planning information?
The common sources of personal financial planning information are financial specialists, printed
materials, school courses and seminars, financial institutions, and computer software. Refer students
to Appendix 1 of the textbook for additional information. The most helpful information sources will
depend on a person’s need and situation. Magazine articles may be helpful to some, while others may
require a computerized information system to gather investment data.
4. Why should you re-evaluate your actions after making personal financial decisions?
Too often people think that once a plan is implemented, the work is over. However, we must
continually re-evaluate our decisions since many factors (our life situation, the economy, AND
personal goals) can change. In addition, we reassess the situation since the alternative selected may