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Personal Finance Basics and the Time Value of Money
What wi this mean for me?
Uncertain economic times intensify the importance of wise personal financial decisions. Each year, more than a million people declare bankruptcy, and Americans lose more than a billion dollars in fraudulent investments. Both of these common difficulties result from poor personal financial planning and incomplete information. Your ability to make wise money decisions is a the basis for your current and long-term well-being.

Obje ives
1. Analyze the process for making personal financial decisions. 2. Develop personal financial goals. 3. Assess personal and economic factors that influence personal financial planning. 4. Calculate time value of money situations associated with personal financial decisions. 5. Identify strategies for achieving personal financial goals for different life situations.

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My Life
HOW DO I START?
s that your aunt has given you One day, you may receive new e find yourself with an extensiv a gift of $10,000. Or you might ute trib con to ire des you maybe amount of credit card debt. Or hunger-relief organization. a or lter she s eles hom a to money ning, and then, n making that requires, first, plan isio dec l ncia fina lves invo ns a few) surprises occur. Each of these situatio carefully considered so no (or only be uld sho use you cess pro The taking action. ties and legal tangles. How will isions is to avoid financial difficul The main focus when making dec statements, select “yes,” “no,” nces? For each of the following planning activities. you best plan for using your fina onse regarding these financial resp al son per r you cate indi to or “uncertain” l decisions, I research them 1. When making major financia rces. using a variety of information sou the next year are 2. My specific financial goals for written down. ation is likely to stay fairly 3. My family and household situ . stable over the next year or two often guide my saving ions ulat calc ey 4. Time value of mon and spending decisions. s of risks that can affect 5. I am able to name specific type my personal financial decisions. Yes Yes Yes Yes Yes No No No No No Uncertain Uncertain Uncertain Uncertain Uncertain

with additional information and will encounter “My Life” boxes As you study this chapter, you s. resources related to these item

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Part 1

PLANNING YOUR PERSONAL FINANCES

The Financial Planning Process
Objective 1
Analyze the process for making personal financial decisions.

personal financial planning The process of managing your money to achieve personal economic satisfaction.

Being “rich” means different things to different people. Some define wealth as owning many expensive possessions and a high income. People may associate being rich with not having to worry about finances or being able to pay bills. For others, being rich means they are able to contribute to organizations that matter to them. How people get rich also varies. Starting a successful business or pursuing a highpaying career are common paths to wealth. However, frugal living and wise investing can also result in long-term financial security. In recent years, many have discovered that the quality of their lives should be measured in terms of something other than money and material items. A renewed emphasis on family, friends, and serving others has surfaced. Most individuals would like to handle their finances so that they get full satisfaction from each available dollar. To achieve this and other financial goals, people first need to identify and set priorities. Both financial and personal satisfaction are the result of an organized process that is commonly referred to as personal money management or personal financial planning. Personal financial planning is the process of managing your money to achieve personal economic satisfaction. This planning process allows you to control your financial situation. Every person, family, or household has a unique financial position, and any financial activity therefore must also be carefully planned to meet specific needs and goals. A comprehensive financial plan can enhance the quality of your life and increase your satisfaction by reducing uncertainty about your future needs and resources. The specific advantages of personal financial planning include

• Increased effectiveness in obtaining, using, and protecting your financial
resources throughout your lifetime.

• Increased control of your financial affairs by avoiding excessive debt, bankruptcy,
and dependence on others for economic security.

• Improved personal relationships resulting from well-planned and effectively
communicated financial decisions.

• A sense of freedom from financial worries obtained by looking to the future,
anticipating expenses, and achieving your personal economic goals. We all make hundreds of decisions each day. Most of these decisions are quite simple and have few consequences. Some are complex and have long-term effects on our personal and financial situations. Personal financial activities involve three main decision areas:

1. SPEND

2. SAVE

3. SHARE

• for daily living expenses • for major expenditures • for recreational activities

• for long-term financial security

• to provide local and global assistance to those in need

Chapter 1

Personal Finance Basics and the Time Value of Money

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Exhibit 1-1

1
Determine current financial situation

Develop your financial goals

The financial planning process

2
Identify alternative courses of action

6
Review and revise the financial plan

The Financial Planning Process

3
Evaluate alternatives
Consider • life situation • personal values • economic factors

5

Create and implement your financial action plan

4

Assess • risk • time value of money (opportunity cost)

While everyone makes decisions, few people consider how to make better decisions. As Exhibit 1-1 shows, the financial planning process is a logical, six-step procedure that can be adapted to any life situation.

STEP 1: DETERMINE YOUR CURRENT FINANCIAL SITUATION
In this first step, you will determine your current financial situation regarding income, savings, living expenses, and debts. Preparing a list of current asset and debt balances and amounts spent for various items gives you a foundation for financial planning activities. The personal financial statements discussed in Chapter 3 will provide the information needed to match your goals with your current income and potential earning power.

Step 1 Example Within the next two months, Kent Mullins will complete his undergraduate studies with a major in international studies. He has worked parttime in various sales jobs. He has a small savings fund ($1,700) and over $8,500 in student loans. What additional information should Kent have available when planning his personal finances? How about you? Depending on your current (or future) life situation, what actions might you take to determine your current financial situation?

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Part 1

PLANNING YOUR PERSONAL FINANCES

STEP 2: DEVELOP YOUR FINANCIAL GOALS
Several times a year, you should analyze your financial values and goals. This activity involves identifying how you feel about money and why you feel that way. Are your feelings about money based on factual knowledge or on the influence of others? Are your financial priorities based on social pressures, household needs, or desires for luxury items? How will economic conditions affect your goals and priorities? The purpose of this analysis is to differentiate your needs from your wants. Specific financial goals are vital to financial planning. Others can suggest financial goals for you; however, you must decide which goals to pursue. Your financial goals can range from spending all of your current income to developing an extensive savings and investment program for your future financial security.

Step 2 Example

Kent Mullins has several goals, including paying off his student loans, obtaining an advanced degree in global business management, and working in Latin America for a multinational company. What other goals might be appropriate for Kent? How about you? Depending on your current (or future) life situation, describe some short-term or long-term goals that might be appropriate for you.

STEP 3: IDENTIFY ALTERNATIVE COURSES OF ACTION
Developing alternatives is crucial when making decisions. Although many factors will influence the available alternatives, possible courses of action usually fall into these categories:

• Continue the same course of action. For example,
you may determine that the amount you have saved each month is still appropriate. • Expand the current situation. You may choose to save a larger amount each month. • Change the current situation. You may decide to use a money market account instead of a regular savings account. • Take a new course of action. You may decide to use your monthly savings budget to pay off credit card debts. Not all of these categories will apply to every decision; however, they do represent possible courses of action. For example, if you want to stop working full time to go to school, you must generate several alternatives under the category “Take a new course of action.” Creativity in decision making is vital to effective choices. Considering all of the possible alternatives will help you make more effective and satisfying decisions. For instance, most people believe they must own a car to get to work or school. However, they

Financial choices require periodic evaluation.

DID YOU KNOW?
According to the National Endowment for Financial Education, 70 percent of major lottery winners end up with financial difficulties. These winners often squander the funds awarded them, while others overspend. Many end up declaring bankruptcy. Having more money does not automatically mean you will make better financial choices.

STEP 4: EVALUATE YOUR ALTERNATIVES You need to evaluate possible courses of action. Thus. taking into consideration your life situation. . you elect to “do nothing.Chapter 1 Personal Finance Basics and the Time Value of Money 5 should consider other alternatives such as public transportation.” which can be a dangerous alternative. opportunity costs will differ for each person. How will the ages of dependents affect your saving goals? How do you like to spend leisure time? How will changes in interest rates affect your financial situation? CONSEQUENCES OF CHOICES Every decision closes off alternatives. What additional alternatives might he consider? How about you? Depending on your current (or future) life situation. shared ownership of a car. Selecting a college major and choosing a career field involve risk. In many financial decisions. It may refer to the money you forgo by attending school rather than working. but it may also refer to the time you spend shopping around to compare brands for a major purchase. cannot always be measured in dollars. carpooling. personal values. renting a car. This cost. or a company car. In either case. Various risks should be considered when making financial decisions. and current economic conditions. such as putting money in an insured savings account or purchasing items that cost only a few dollars. Your chances of losing something of great value are low in these situations. when you decide not to take action. identifying and evaluating risk is difficult (see Exhibit  1-2). Since decisions vary based on each person’s situation and values. For example. EVALUATING RISK Uncertainty is a part of every decision. Opportunity cost is what you give up by making a choice. Remember. He could work full time and save for graduate school. opportunity cost What a person gives up by making a choice. the resources you give up (money or time) have a value that is lost. A decision to go to school full time may mean you cannot work full time. list various alternatives for achieving the financial goals you identified in the previous step. What if you don’t like working in this field or cannot obtain employment in it? Other decisions involve a very low degree of risk. or he could go to school part time and work part time. he could go to graduate school full time by taking out an additional loan. Decision making will be an ongoing part of your personal and financial situation. The best way to consider risk is to gather information based on your experience and the experiences of others and to use financial planning information sources. you will need to consider the lost opportunities that will result from your decisions. Step 3 Example Kent Mullins has several options available for the near future. commonly referred to as the trade-off of a decision. a decision to invest in stock may mean you cannot take a vacation.

Purchasing a certain brand or from a certain store may create the risk of having to obtain repairs at an inconvenient location. I research them using a variety of information sources. Step 4 Example As Kent Mullins evaluates his alternative courses of action. you often need a map. or additional costs associated with various purchases or financial decisions. Exhibit 1-3 offers an overview of the informational resources available when making personal financial decisions. shelter current income in a tax-deferred . • Personal risk may also take the form of health risks. What risks and trade-offs should Kent consider? How about you? Depending on your current (or future) life situation. you may have to pay more. what types of risks might you encounter in your various personal financial activities? STEP 5: CREATE AND IMPLEMENT YOUR FINANCIAL ACTION PLAN This step of the financial planning process involves developing an action plan that identifies ways to achieve your goals. Always consider information from several sources when making financial decisions. safety risks. you will earn a lower return with a six-month savings certificate than with a certificate having a longer maturity. you may increase the amount withheld from each paycheck. you can increase your savings by reducing your spending or by increasing your income through extra time on the job. Changing personal. If you buy later. social. they may be more difficult to convert to cash or to sell without significant loss in value. For example. Variable rate loans may increase. If you save when interest rates are dropping. see Appendix A for other financial planning resources. • Individuals who face the risk of unemployment need to save while employed or acquire skills they can use to obtain a different type of work. FINANCIAL PLANNING INFORMATION SOURCES When you travel. Relevant information is required at each stage of the decision-making process. Interest Rate Risk L IB ERT Y Personal Risk L IB ERT • Many factors can create a less than desirable situation. • Changing interest rates affect your costs (when you borrow) and your benefits (when you save or invest). • Some savings and investments have potential for higher earnings. • Decide whether to buy something now or later.6 Part 1 PLANNING YOUR PERSONAL FINANCES Exhibit 1-2 Types of risk Inflation Risk • Rising or falling (deflation) prices cause changes in buying power. In addition to various Web sites. resulting in higher payments. file quarterly tax payments. If you are concerned about year-end tax payments. • The loss of a job may result from changes in consumer spending or expanded use of technology. and economic conditions will require that you continually supplement and update your knowledge. However. This book provides the foundation you need to make appropriate personal financial planning decisions. Y Liquidity Risk My Life 1 When making major financial decisions. Traveling the path of financial planning requires a different kind of map. He should also assess career opportunities with his current skills and his potential with advanced training. he must consider his income needs for both the short term and the long term. • Borrowing at a low interest rate when interest rates are rising can be to your advantage.

this financial planning process will provide a vehicle for adapting to those changes. end when you take a particular action. When life events affect your financial needs. social. STEP 6: REVIEW AND REVISE YOUR PLAN DID YOU KNOW? Financial planning is a dynamic process that does not Phone apps are available for comparing prices. and (3) takes a couple of courses in the evening and on weekends. As you achieve  your  short-term or immediate goals. accountants • insurance agents • credit counselors • tax preparers Financial Institutions Materials. or mutual funds. and monitoring investments. or buy municipal securities. bonds. (2) saves money for graduate school. For example. courses with: • financial planners • bankers. Changing personal.Chapter 1 Personal Finance Basics and the Time Value of Money 7 Exhibit 1-3 Financial planning information sources Print and Media • books • periodicals • newsletters • television. costs ranging from free to a few dollars. Regularly reviewing this decision-making process will help you make priority adjustments that will bring your financial goals and activities in line with your current life situation. To implement your financial action plan. you may need assistance from others. and economic factors may require more frequent assessments. You need to regulocating an ATM. the goals next in priority will come into focus. you may use the services of an insurance agent to purchase property insurance or the services of an investment broker to purchase stocks. Step 5 Example Kent Mullins has decided to work full time for a few years while he (1) pays off his student loans. websites from: • credit unions • banks • investment. insurance. . What are the benefits and drawbacks of this choice? How about you? Depending on your current (or future) life situation. You should do a many personal finance capabilities with complete review of your finances at least once a year. describe the benefits and drawbacks of a financial situation you have encountered during the past year. real estate companies retirement program. radio programs Digital Sources • websites • blogs • phone apps • online videos • social media Financial Experts Seminars. Mobile phones with Web access provide larly assess your financial decisions.

and personal situations. such as saving for a vacation or paying off small debts. The answer seems to be the result of two main factors. Kent Mullins should reassess his financial. what factors in your life might affect your personal financial situation and decisions in the future? Sheet 1 Personal data CONCEPT CHECK 1-1 1 2 3 4 What are the main elements of every decision we make? What are some risks associated with financial decisions? What are some common sources of financial planning information? Why should you reevaluate your actions after making a personal financial decision? Sheet 2 Financial institutions and advisers Action Application Prepare a list of potential risks involved with making various personal and financial decisions. The first is poor planning and weak money management habits in areas such as spending and the use of credit. The first is the time frame in which you would like to achieve your goals. will be achieved within the next year. • intermediate goals have a time frame from one to five years. • short-term goals. selling efforts. The other factor is extensive advertising. TYPES OF FINANCIAL GOALS Two factors commonly influence your financial aspirations for the future. Since the United States is one of the richest countries in the world. . such as retirement. TIMING OF GOALS What would you like to do tomorrow? Believe it or not.8 Part 1 PLANNING YOUR PERSONAL FINANCES Step 6 Example Over the next 6 to 12 months. What employment opportunities or family circumstances might affect his need or desire to take a different course of action? How about you? Depending on your current (or future) life situation. or the purchase of a vacation home. career. that question involves goal setting. What actions might be taken to investigate and reduce these risks? Developing Personal Financial Goals Objective 2 Develop personal financial goals. it is difficult to understand why so many Americans have money problems. The second is the type of financial need that drives your goals. A variety of personal and financial goals will motivate your actions. Achieving personal financial satisfaction starts with clear financial goals. money for children’s college education. and product availability. which may be viewed in three time frames. • long-term goals involve financial plans that are more than five years off.

“If you don’t know where you’re going.Chapter 1 Personal Finance Basics and the Time Value of Money 9 Long-term goals should be planned in coordination with short-term and intermediate ones. Your financial goals are the basis for planning. For example. Other goals. DID YOU KNOW? clothing.” Having specific financial goals in writing that A—action-oriented. tion of successful personal financial planning. situation. can have a negative effect on your financial America (CFA) estimates that more than 60 million situation. Your financial goals should take as S-M-A-R-T approach. expensive items such as appliances. For example. life circumstances is also necessary for your overall well-being. and measuring the progress of your spending. saving for a down payment to buy a house is an intermediate goal that can be a foundation for a long-term goal: owning your own home. such as three years. use “Financial Planning pay off amounts owed. or a house. implementing. about twice as much savings and investhealth. Some goals. M—measurable with a specific amount. savIn contrast. Exhibit 1-4 on page 10 offers typical goals and financial activities for various life situations. To start (or continue) creating and achieving “Reduce credit card debt” will usually mean actions to your financial goals. Goal setting for these ments as savers without plans. These goals may relate to personal relationships. Such purchases. and leisure. occur less frequently. saving. of a comprehensive financial plan. if made A survey conducted by the Consumer Federation of unwisely. many people overlook intangible-purchase ers who say they have financial plans report goals. investment fund. cars. In house-holds and sporting equipment. “Accumulate $5. it is probably not realistic to expect to buy a new car each year if you are a full-time student. GOALS FOR DIFFERENT FINANCIAL NEEDS A goal of obtaining increased career training is different from a goal of saving money to pay a semiannual auto insurance premium.” Goal setting is central to financial decision making. such as a college education. so you know exactly what your goals are so you can create a plan designed to achieve those objectives. these consist of tangible items.000. Goal frequency is another ingredient in the financial planning process. Consumable-product goals usually occur on a periodic basis and involve items that are used up relatively quickly. providing the basis for the personal you review on a regular basis is the foundafinancial activities you will undertake. you might end up somewhere else and not even know it. For example. and entertainment. My Life 2 . education. for Life’s Situations: Developing Financial R—realistic. T—time-based. such as vacations or money for gifts. GOAL-SETTING GUIDELINES An old saying goes. Setting and achieving short-term goals is the basis for achieving long-term goals. in that they are: S—specific. and investing activities. For example.000 in an investment fund within three My specific financial goals for the next year years” is more measurable than “Put money into an are written down. with annual incomes of less than $100. involving goals based on your income and life Goals” on page 11. a car. indicating a time frame for achieving the goal. such as food. This allows you to measure your progress toward your financial goals. American households will probably fail to realize one Durable-product goals usually involve infrequently or more of their major life goals largely due to a lack purchased. may be set annually.

• Make a will and develop an estate plan. Young couple with children under 18 • Carefully manage the increased need for the use of credit. . Young dual-income couple. • Develop savings and investment program for changes in life situation (larger house. • Establish and implement a plan for retirement goals. • Name a guardian for children and make other estate plans. • Plan retirement housing. If This Is Your Life Situation. Older couple (50+). children). • Obtain disability insurance to replace income during prolonged illness. Specialized Financial Activities • Establish financial independence. Common Financial Goals and Activities • Obtain appropriate career training. • Use dependent care service if needed. . • Use a will to name guardian for children. • Accumulate an appropriate emergency fund. • Create and implement a flexible budget. You Should . • Purchase appropriate types and amounts of insurance coverage. with elderly getting income while alive and principal going to surviving relatives. • Provide arrangements for handling finances of elderly if they become ill. no children • Coordinate insurance coverage and other benefits. • Review will and estate plan. Single parent with children under 18 • Obtain adequate amounts of health. living expenses. • Develop a regular savings and investment program. no dependent children at home • Review financial assets and estate plans. • Consider splitting of investment cost. • Plan retirement living facilities. and part-time work. Older (50+). and activities. • Obtain an appropriate amount of life insurance for the care of dependents. • Consider tax-deferred contributions to retirement fund. and disability insurance. life. • Consider home purchase for tax benefit. • Evaluate and select appropriate investments. . single • Make arrangement for long-term health care coverage. Young. single (18–35) . living expenses. . Mixed-generation household (elderly individuals and children under 18) • Obtain long-term health care insurance and life/disability income for care of younger dependents. • Consider household budget changes several years prior to retirement. recreational activities.` • Create an effective financial recordkeeping system.10 Part 1 PLANNING YOUR PERSONAL FINANCES Exhibit 1-4 Financial goals and activities for various life situations Time to Take Action . • Contribute to savings and investment fund for college.

Financial Planning for Life’s Situations DEVELOPING FINANCIAL GOALS Based on your current situation or expectations for the future. and personal beliefs influence your spending and saving patterns. 11 . income. Objective 3 Assess personal and economic factors that influence personal financial planning. Three main elements affect financial planning activities: life situation. and economic factors. ranging from age and household size to interest rates and inflation. relatives. Your life situation or lifestyle is created by a combination of factors. household size. personal values. What are some of the common goals for various personal situations? Sheet 3 Setting personal financial goals Influences on Personal Financial Planning Many factors influence daily financial decisions. Personal factors such as age. and others about their short-term and long-term financial goals. create one or more financial goals based on this process: STEP 1 Realistic goals for your life situation STEP 3 Determine time frame STEP 2 State goals in measurable terms STEP 4 Actions to be taken CONCEPT CHECK 1-2 1 What are examples of long-term goals? 2 What are the five main characteristics of useful financial goals? Action Application Ask friends. LIFE SITUATION AND PERSONAL VALUES People in their 20s spend money differently than those in their 50s.

different types of financial needs evolve. over 80 percent of all Americans now living are expected to live past age 65. values Ideas and principles that a person considers correct. the adult life cycle—the stages in the family and financial needs of an adult—is an important influence on your financial activities and decisions. social. ECONOMIC FACTORS Daily economic activities are another important influence on financial planning. Values have a direct influence on such decisions as spending now versus saving for the future or continuing school versus getting a job.12 Part 1 PLANNING YOUR PERSONAL FINANCES Exhibit 1-5 Life situation influences on your financial decisions Age Employment Situation • 18 – 24 • 25 – 34 • 35 – 44 • 45 – 54 • 55 – 64 • 65 and over • full-time student • not employed • full-time employment or volunteer work • part-time employment or volunteer work Marital Status Number and Age of Household Members • no other household members • preschool children • elementary and secondary school children • college students • dependent adults • nondependent adults • single • married • separated/divorced • widowed My Life 3 My family and household situation is likely to stay fairly stable over the next year or two. • A career change or a move to a new area. our nation’s central bank. We are also living longer. As our society changes. household size. Retirement. desirable. In our society. and important. and economic factors can affect your life situation. labor. and important. desirable. or other dependent. Today people tend to get married at a later age. the Federal Reserve System. Refer to Exhibit 1–4 for further information on financial goals and personal finance activities for various life situations. The . In addition to being defined by your family situation. family member. the forces of supply and demand play an important role in setting prices. The economic environment includes various institutions. • Engagement and marriage. adult life cycle The stages in the family situation and financial needs of an adult. Many households are headed by single parents. Many personal. As Exhibit 1-5 shows. that must work together to satisfy our needs and wants. and government. economics The study of how wealth is created and distributed. The death of a spouse. Economics is the study of how wealth is created and distributed. Your life situation is also affected by marital status. While various government agencies regulate financial activities. Changes in health. and employment. and more households have two incomes. as well as events such as • Graduation (at various levels of education). • The birth or adoption of a child. Divorce. • • • • • Dependent children leaving home. principally business. you are defined by your values—the ideas and principles that you consider correct. has significant responsibility in our economy. More than 2 million women provide care for both dependent children and parents.

For example. Our economy is affected by both the financial activities of foreign investors and competition from foreign companies. Your personal financial decisions are most heavily influenced by consumer prices. the dollars you pay the lender have lost buying power. This reduced money supply may cause higher interest rates. if prices increased 5 percent during the last year. means prices will double in 18 years (72 ÷ 4 = 18).S. At a 12 percent annual inflation rate. For this reason. It achieves this by influencing borrowing.-made goods is lower than Various economic conditions affect the value of the level of imported goods. The rate of inflation varies. Also. To find out how fast prices (or your savings) will double. Consumer Prices Inflation is a rise in the general level of prices. your money will double in 12 years (72 ÷ 6 = 12). consumer spending. dollars leave the country investments and your personal financial situation. inflation A rise in the general level of prices. Exhibit  1-6 has an overview of some economic indicators that influence financial decisions. Inflation is most harmful to people living on fixed incomes. more U. When the level of exports of U. Unless an adequate interest rate is charged. for example. GLOBAL INFLUENCES The global marketplace influences financial activities. if people have more money to spend because of pay increases or borrowing but the same amounts of goods and services are available. prices double (and the value of the dollar is cut in half) in about six years.Chapter 1 Personal Finance Basics and the Time Value of Money 13 Fed. and the buying or selling of government securities. During the late 1970s and early 1980s. the buying power of the dollar decreases. The main cause of inflation is an increase in demand without a comparable increase in supply. and interest rates. if you earn 6 percent. is concerned with maintaining an adequate money supply. If you pay 10 percent interest on a loan and the inflation rate is 12 percent. interest rates rise in periods of high inflation. This means it now takes more money to buy the same amount of goods and services. if foreign companies decide not to invest their dollars in the United States. . amounts repaid by borrowers in times of inflation have less buying power than the money they borrowed. the domestic money supply is reduced. items that cost $100 one year ago would now cost $105. Inflation can also adversely affect lenders of money. retired people and others whose incomes do not change are able to afford smaller amounts of goods and services. This reduces the funds available for domestic spending and investment. Due to inflation. than the dollar value of foreign currency coming into the United States. 1. EXAMPLE: RULE OF 72 An annual inflation rate of 4 percent. the cost of living increased 10 to 12 percent annually. the increased demand can bid up prices for those goods and services. For example. In times of inflation. use the rule of 72: Just divide 72 by the annual inflation (or interest) rate. the annual inflation rate was in the 1 to 3 percent range.S. The Fed attempts to make adequate funds available for consumer spending and business expansion while keeping interest rates and consumer prices at an appropriate level. as it is called. American businesses compete against foreign companies for the spending dollars of American consumers. ECONOMIC CONDITIONS Financial web sites provide current economic statistics. Regarding savings. During the late 1950s and early 1960s. interest rates.

is a measure of the average change in the prices urban consumers pay for a fixed “basket” of goods and services. go to www. and overall economic expansion. Higher interest rates make buying on credit more expensive. and their prices will drop. higher interest rates make saving and investing more attractive and discourage borrowing.gov. The difference between a country’s exports and its imports. may rise at a higher rate than the cost of nonessential items. The demand for goods and services by individuals and households. income. As a result. more consumer spending. Inflation rates can be deceptive. People who are unemployed should reduce their debt level and have an emergency savings fund for living costs while out of work. As prices drop. The relative value of stocks represented by the index. These indexes provide an indication of the general movement of stock prices. The GDP provides an indication of a nation’s economic viability. Consumer spending Interest rates The cost of money.bls. S&P 500. other stock market indexes More recently. . resulting in employment and opportunities for increased personal wealth. you are unable to purchase the same amount of goods and services. Gross domestic product (GDP) Trade balance Dow Jones Average. The dollars available for spending in our economy. the return on your money when you save or invest. but higher saving (and lower spending) may also reduce job opportunities. Increased consumer spending is likely to create more jobs and higher wages. on which they spend most of their money. gas. higher consumer prices will also cause higher interest rates. the balance of payments deficit can result in price changes for foreign goods. published by the Bureau of Labor Statistics. high levels of consumer spending and borrowing can also push up consumer prices and interest rates. Increased home building results in more job opportunities. changes If consumer prices increase faster than your in inflation. consumers expect they will go even lower. including items produced with foreign resources. which causes damaging economic conditions. high unemployment reduces consumer spending and job opportunities. Most people face hidden inflation since the cost of necessities (food. can also have damaging economic effects. The number of people without employment who are willing and able to work. Interest rates tend to decline as more people save and invest. The consumer price index (CPI). higher wages. Deflation. health care). a decline in prices. they cut their spending. This results in a personal inflation rate that is higher than the government’s CPI.14 Part 1 PLANNING YOUR PERSONAL FINANCES Exhibit 1-6 Economic Factor Consumer prices Changing economic conditions and financial decisions What It Measures How It Influences Financial Planning The buying power of a dollar. For current CPI information. While widespread deflation is unlikely. certain items may be affected. the cost of credit when you borrow. The total value of goods and services produced within a country’s borders. the annual price increase for most goods and services as measured by the consumer price index has been less than 2 percent. Money supply Unemployment Housing starts The number of new homes being built. If a country exports more than it imports.

financial uncertainty affects nearly everyone. home. 3. People are desperate when faced with financial difficulties. 15 . 5. This action will allow you to better control your short-term and long-term financial situation. While you may be tempted to reduce spending by reducing insurance costs. In contrast. Decide which budget items can be eliminated or reduced. which can make them more vulnerable to investment fraud. and other deceptions.HOW TO . such as: What 1. . Avoid financial scams. Consumer Spending Total demand for goods and services in the economy influences employment opportunities and the potential for income. Evaluate insurance coverages. The financial hardships of unemployment are a major concern of business. Avoid additional debt in times of financial uncertainty. 2. make every attempt to resist that action. 6. 4. the financial resources of current and prospective employees expand. and motor vehicles. since staff reduction commonly results from a company’s reduced financial resources. Retraining programs. Talking about the financial difficulties can reduce anxiety. Obtain complete information before taking action. credit repair swindles. and government. Savings can be gained by comparing various insurance companies. Communicate with family members. These discussions can have benefits during the crisis and can help prepare children for financial situations they will likely encounter in their lifetime. labor. Fundamental personal economic decision making can serve individuals and households in all circumstances. Involve them in decisions that might be necessary to reduce family spending. These suggestions may be valid for every financial situation in every economic setting. and job services can help people adjust. Review the safety of your savings. Why While you may be tempted to pay for various items with a credit card. Reduce spending. income assistance. As consumer purchasing increases. Reduce your use of debt. Make sure your accounts in banks and credit unions are within the limits covered by federal deposit insurance. be sure you have adequate coverage for life. reduced spending causes unemployment. Don’t rush into a “too good to be true” situation. Your ability to know and use wise personal finance strategies will serve you in all stages of your life and in every stage of the business cycle. Difficult times require difficult actions. This situation improves the financial condition of many households. 2. . Cope in Times of Financial Difficulty At some point. Most wise personal financial planning strategies advocated during prosperous times are equally valid during times of financial difficulty. health.

expected inflation. Or you might gain the use of an expensive item now by making credit payments from future earnings. health) Financial Opportunity Costs (interest. Interest Rates In simple terms. Exhibit 1-7 Opportunity costs and financial results should be assessed when making financial decisions Personal Opportunity Costs (time. you sacrifice something to obtain something else that you consider more desirable. Like everything else. college education. Opportunity Costs and the Time Value of Money Objective 4 Calculate time value of money situations associated with personal financial decisions.federalreserve. retirement fund) . When consumer saving and investing increase the supply of money. Interest rates affect your financial planning. The forces of supply and demand influence interest rates. Current interest rate data may be obtained at www. government. employment situation. Sheet 4 Monitoring current economic conditions CONCEPT CHECK 1-3 1 How do age.gov. as consumer. you might forgo current buying to invest funds for future purchases or long-term financial security. For example. home. create an inflation rate that reflects the change in price for items commonly bought by you and your family. Interest rates influence many financial decisions. money has a price. insurance coverage. Risk is also a factor in the interest rate you pay as a borrower. interest rates tend to rise. business. People with poor credit ratings pay a higher interest rate than people with good credit ratings. Have you noticed that you must give up something when you make choices? In every financial decision. However.16 Part 1 PLANNING YOUR PERSONAL FINANCES 3. liquidity. and foreign borrowing increase the demand for money. and other personal factors affect financial planning? 2 How might the uncertainty of inflation make personal financial planning difficult? 3 What factors influence the level of interest rates? Action Application Using Web research and discussion with others. and the extent of uncertainty about getting your money back. marital status. The earnings you receive as a saver or an investor reflect current interest rates as well as a risk premium based on such factors as the length of time your funds will be used by others. effort. These opportunity costs may be viewed in terms of both personal and financial resources (see Exhibit 1-7). household size. interest rates represent the cost of money. investments. interest rates tend to decrease. safety) Financial Acquisitions (automobile.

$500 on deposit at 6 percent for six months would earn $15 ($500 × 0. and reduced financial security.Chapter 1 Personal Finance Basics and the Time Value of Money 17 PERSONAL OPPORTUNITY COSTS An important personal opportunity cost involves time that. . Spending money from your savings account means lost interest earnings. • The length of time the money is on deposit. The allocation of time should be viewed like any decision: Select your use of time to meet your needs. Every time you spend. Other personal opportunity costs relate to health. abilities.06 × 6/12. These three items are multiplied to obtain the amount of interest. you must consider the time value of money. cannot be used for other activities. Poor eating habits. • Purchasing a new automobile or home appliance has the potential benefit of saving you money on future maintenance and energy costs. • Making annual deposits in a retirement account can help you avoid the opportunity cost of having inadequate funds later in life. Simple interest is calculated as follows: Amount in savings × Annual interest rate × Time period = Interest For example. or avoiding exercise can result in illness. or 1/2 year). The opportunity cost of the time value of money is also present in these financial decisions: time value of money Increases in an amount of money as a result of interest earned. increased health care costs. knowledge) require careful management. Like financial resources. but your current needs may make this trade-off worthwhile. working. • Setting aside funds in a savings plan with little or no risk has the opportunity cost of potentially higher returns from an investment with greater risk. what you buy with that money may have a higher priority than those earnings. In making those choices. you should consider the time value of that money as an opportunity cost. INTEREST CALCULATIONS Three amounts are required to calculate the time value of money for savings in the form of interest earned: • The amount of the savings (commonly called the principal). achieve your goals. however. your personal resources (time. and satisfy personal values. FINANCIAL OPPORTUNITY COSTS You are constantly making choices among various financial decisions. energy. invest. or borrow money. when used for one activity. or shopping will not be available for other uses. Time used for studying. • Having extra money withheld from your paycheck in order to receive a tax refund has the opportunity cost of the lost interest the money could earn in a savings account. the increases in an amount of money as a result of interest earned. Borrowing to make a purchase involves the opportunity cost of paying interest on the loan. health. • The annual interest rate. lack of sleep. Saving or investing a dollar instead of spending it today results in a future amount greater than a dollar. time away from school or work. save.

65 at the end of that time ($50 × 7. est that will increase over time. but the computations would be time consuming. The future value of an amount will always be greater than the original amount. For this table to be used. My Life 4 present value computations for achieving personal financial goals. Present value tables (Exhibit 1–8C) can be used to make the computations.cnn. several Web sites are available: for example.387 at age 65.040 at age 65. Future value is the amount to which current savings will increase based on a certain interest rate and a certain time period. the greater the future value Time value of money calculations often will be. also referred to as discounting.money. making the $1. Present value computations.com/tools FUTURE VALUE OF A SERIES OF DEPOSITS Quite often. PRESENT VALUE OF A SINGLE AMOUNT Another aspect of the time value of money involves determining the current value of an amount desired in the future. since all of the factors in Exhibit 1–8C are less than 1 and interest earned will increase the present value amount to the desired future amount. third.moneychimp.com/calculator.000 five years from now and you earn 5 percent on your savings.153). www. Compounding allows the future value of a deposit to grow faster than it would if interest were paid only on the original deposit. Future value tables simplify the process (see Exhibit 1-8). if you want to . also referred to as compounding. present value The current value for a future amount based on a certain interest rate and a certain time period. multiply the amount deposited by the factor for the desired interest rate and time period. PRESENT VALUE OF A SERIES OF DEPOSITS You can also use present value computations to determine how much you need to deposit so that you can take a certain amount out of the account for a desired number of years.000 deposit To assist you with using future value and at age 25 would result in an account balance of $7. For example. $650 at 8 percent for 10 years would have a future value of $1. Present value is the current value for a future amount based on a certain interest rate and a certain time period. you will have $357.18 Part 1 PLANNING YOUR PERSONAL FINANCES You can calculate the increased value of your money from interest earned in two ways: You can calculate the total amount that will be available later (future value). the deposits must earn a constant interest rate.403. www.dinkytown. To use a future value table. The present value of the amount you want in the future will always be less than the future value. use Exhibit 1–8B. However.06 × 1 year) + $106 | | Original amount in savings Amount of interest earned The same process could be continued for a second. FUTURE VALUE OF A SINGLE AMOUNT Deposited money earns interfuture value The amount to which current savings will increase based on a certain interest rate and a certain time period.000 in a 5 percent account at age 40 will guide my saving and spending decisions. For example.000 × 0. The Financial Planning Calculations box on page 19 presents an example of using future value to achieve a financial goal. also called discounting. For example. you need to deposit $784 ($1. and cgi. If you want $1. or you can determine the current value of an amount desired in the future (present value). give you $3. all the future value factors are larger than 1. starting at the end of the first year. An annuity is a series of equal deposits or payments. To determine the future value of equal yearly savings deposits. since interest is earned on previously earned interest. $100 deposited in a 6 percent account for one year will grow to $106. If you deposit $50 a year at 7 percent for six years. Future value computations may be referred to as compounding.784).35 ($650 × 2. Depositing $1. As Exhibit 1-8A shows. and fourth year. This amount is computed as follows: Future value = $100 + ($100 × 0. The sooner you make deposits. allow you to determine how much to deposit now to obtain a desired total in the future.net.159). savers and investors make regular deposits.

816 8% 5.614 6% 0.100 4.767 5.108 7.985 7.407 1.539 1.627 0.558 7% 0.172 2.689 1.594 1.718 1.340 1.629 6% 1.540 0.637 12.276 1.747 6.502 0.665 0.654 10.460 0.504 1.024 8% 3.747 0.993 2.592 0.993 4.967 Year 5 6 7 8 9 10 5% 1.995 6.260 11.549 11.501 1.713 0.587 1.153 8.200 11.838 1.606 1.711 0.463 9% 0.360 7% 4.746 0.394 9.488 14.666 0.076 5. .A.784 0.487 9% 5.791 B. Future Value of $1 (single amount) Exhibit 1-8 Percent Time value of money tables (condensed) 8% 1. Present Value of a Series of Annual Deposits (annuity) Percent Year 5 6 7 8 9 10 5% 4.623 5.681 0.247 6.630 0.999 2.159 9% 1.851 1.526 6.978 13.142 9.867 7.021 15.705 0.027 12.890 4.751 7.500 0.210 6.923 10.486 5. Present Value of $1 (single amount) Percent Year 5 6 7 8 9 10 5% 0.645 0.033 5.897 11.336 8.722 6% 4.677 0.578 6% 5.212 4.206 5.535 5.422 D.544 0.582 6.917 5.828 1.469 1.418 Note: See the appendix at the end of this chapter for more complete future value and present value tables.637 6.971 6.329 5.367 7% 1.491 13.508 8% 0.477 1.523 9.181 7% 5.714 1.975 8. Future Value of a Series of Annual Deposits (annuity) Percent Year 5 6 7 8 9 10 5% 5.551 1.582 0.403 1.547 0.650 0.596 0.463 7.193 C.028 13.583 0.623 0.338 1.710 9% 3.419 1.677 1.515 7.786 6.802 7.802 8.389 5.

10 years $10. 10.money.000 in an account for the next 10 years. When achieving specific financial goals requires regular deposits to a savings or investment account. 0.288. time value of money tables are available. For example.moneychimp. amount per period.000 × 1. Some easy-to-use calculators for computing the time value of money and other financial computations are located at • www.Financial Planning Calculations TIME VALUE OF MONEY CALCULATION METHODS The time value of money may be calculated using a variety of techniques.dinkytown. the keystrokes would be: Amount Time periods Interest rate Result –10000 PV 10 N 5 I FV $ 16.000 × Future value of $1.288.net • www. including time value of money. Spreadsheet Software Excel and other spreadsheet programs have built-in formulas for various financial computations.95 (Keystrokes for various brands and models of financial calculators are available at www.629 = $16. this type of calculation would require this format: = FV ( rate. periods. Financial Calculator A variety of handheld financial calculators are programmed with various financial functions. The numeric factors presented ease the computational process.com/calculator • cgi.05. 5%.cnn.TVMCalcs. Jonie Emerson plans to deposit $10.05 )10 = $16.288. What amount can Jonie expect to have available after 10 years? Method Formula Calculation The most basic method of calculating the time value of money involves using a formula. –10000 ) = $16. the formula would be: PV ( 1 = i )n = FV The result should be $10.95 Time Value of Money Web Sites Many time-value-of-money calculators are also available online. Both future value and present value calculations may be performed using the appropriate keystrokes.95 Using the future value table in Exhibit 1–8A: $10. These Web-based programs perform calculations for the future value of savings as well as determining amounts for loan payments. These are described in the appendix at the end of this chapter. Time Value of Money Tables Instead of calculating with a formula. single amount ) The results of this example would be: = FV( 0.290 Using a financial calculator.kiplinger.com/tools Note: The slight differences in answers are the result of rounding. the computation may occur in one of several ways.com) When using a spreadsheet program. She estimates these funds will earn an annual rate of 5 percent. Results For this situation. 20 .com/tools • www. Process.000 ( 1 + 0.

b. as well as tables covering a wider range of interest rates and time periods. DID YOU KNOW? If you invest $2.498. these funds will grow to $470. However.247). at age 65 this fund will be worth $579. since these resources are used for all financial activities. Objective 5 Identify strategies for achieving personal financial goals for different life situations.rileyguide. our needs usually can be satisfied with the intelligent use of financial resources. COMPONENTS OF PERSONAL FINANCIAL PLANNING This book is designed to provide a framework for the study and planning of personal financial decisions. or ownership of a business. you can avoid many common money mistakes. you must coordinate these components through an organized plan and wise decision making. Financial planning involves deciding how to obtain. investments. state one or more goals in terms of an annual savings amount and the future value of this savings objective. Exhibit 1-9 presents an overview of the eight major personal financial planning areas. To achieve a successful financial situation. Action Application What is the relationship between current interest rates and financial opportunity costs? Using time value of money calculations. OBTAINING (CHAPTER 2) You obtain financial resources from employment. Additional methods for calculating time value of money are also shown in the “Financial Planning Calculations” box.000 a year (at 9 percent) from ages 31 to 65.com and www. . are presented in the appendix at the end of this chapter. and use those resources. you can see from Exhibit 1–8D that you would need to make a current deposit of $2. The formulas for calculating future and present values. The future value of $100 at 7 percent in 10 years. Obtaining financial resources is the foundation of financial planning.000 a year (at 9 percent) for only 9 years from ages 22 to 30. monster. c. Online Sources for Obtaining Many guidelines for effective career planning and professional development may be obtained at www.Chapter 1 Personal Finance Basics and the Time Value of Money 21 take $400 out of an investment account each year for nine years and your money is earning an annual rate of 8 percent.com. By using the eight major areas of personal financial planning to organize your financial activities.471! Most important: Start investing something now! CONCEPT CHECK 1-4 1 How can you use future value and present value computations to measure the opportunity cost of a financial decision? 2 Use the time value of money tables in Exhibit 1–8 to calculate the following: a. protect. if you save $2.249 by age 65. Sheet 5 Time value of money calculations Achieving Financial Goals Throughout life.80 ($400 × 6. The future value of $100 a year for six years earning 6 percent. The present value of $500 received in eight years with an interest rate of 8 percent.

An amount of savings must be available to meet current household needs. SAVING (CHAPTER 5) Long-term financial security starts with a regular savings plan for emergencies. Liquidity refers to the ability to readily convert financial resources into cash without a loss in value. and the purchase of special goods and services.20somethingfinance. 19) Exhibit 1-9 Components of personal financial planning Part 1 Planning Your Personal Finances Obtaining (Chapter 2) Part 5 Investing Your Financial Resources We have a note to use "color21".22 Part 1 PLANNING YOUR PERSONAL FINANCES Part 6 Controlling Your Financial Future Retirement and Estate Planning (Chapters 18. unexpected bills. Efforts to anticipate expenses and financial decisions can also help reduce taxes. 4) Managing Risk (Chapters 10–12) Part 4 Insuring Your Resources Sa ving (Chapter 5) Spending (Chapters 8. Please check and confirm. or a vacation home. replacement of major items.banx. we have used 40% tint of color21.gov. and money market funds earn money on your savings while providing liquidity. and www.com and www. 9) Part 3 Making Your Purchasing Decisions Borrowing (Chapters 6. go to www. no less—is vital to increasing your financial resources. Since the color is too dark and the type is in blank. liquidity The ability to readily convert financial resources into cash without a loss in value. Investing (Chapters 13–17) Planning (Chapters 3.bankrate.com. The ability to pay your fair share of taxes—no more. health. www. and tax planning should not occur only around April 15.com. you may use additional money for investments that offer greater financial growth. such as a college education. money market accounts.money. Savings plans such as interest-earning checking accounts. 4) Planned spending through budgeting is the key to achieving goals and future financial security.com. The need for liquidity will vary based on a person’s age. Online Sources for Planning Budgeting is an ongoing activity. 7) Part 2 Managing Your Personal Finances PLANNING (CHAPTERS 3. Online Sources for Saving Fast updates on savings rates and other banking services are available at www. Once you have established a basic savings plan. a boat. . For assistance.irs. and family situation.

Yet surveys reveal that most people have adequate life insurance but few have disability insurance.com and www.com and www. For example.com. Many households have excessive or overlapping insurance coverage. Over 70 percent of car buyers research purchases online at Web sites such as www. Certain types of insurance are commonly overlooked in financial plans.org and www.consumerworld. and other types of credit are available at www. the number of people who suffer disabling injuries or diseases at age 50 is greater than the number who die at that age. SPENDING (CHAPTERS 8. bankruptcy A set of federal laws that allow you to either restructure your debts or remove certain debts. In contrast. Insuring property for more than it is worth may be a waste of money. personal loans. The people who declare bankruptcy each year may have avoided this trauma with wise spending and borrowing decisions.carinsurance.Chapter 1 Personal Finance Basics and the Time Value of Money 23 BORROWING (CHAPTERS 6. and other investments with potential for increased value in the future. Online Sources for Managing Risk Insurance planning assistance and rate quotes may be obtained at personalinsure.bankmonitornotes.gov. Online Sources for Borrowing Current rates for credit cards.com and autos. The planning component of personal finance provides a foundation for other activities. people invest for two primary reasons. The insurance industry is more aggressive in selling life insurance than in selling disability insurance. Chapter 7 discusses bankruptcy in detail. You should detail your living expenses and your other financial obligations in a spending plan. 9) Financial planning is designed not to prevent your enjoyment of life but to help you obtain the things you want. Online Sources for Spending Consumer buying information is available at www.about.bankrate. www. The overuse and misuse of credit may cause a situation in which a person’s debts far exceed the resources available to pay those debts. people make purchases without considering the financial consequences. however.consumer.autoweb . Bankruptcy is a set of federal laws that allow you to either restructure your debts or remove certain debts. creating financial difficulties. Too often. Some people shop compulsively.com. consumercredit.com. real estate. Prospective home buyers can obtain financing online at www. Those interested in current income select investments that pay regular dividends or interest. thus putting the burden of obtaining adequate disability insurance on you. so people may need disability insurance more than they need life insurance. MANAGING RISK (CHAPTERS 10–12) Adequate insurance coverage is another component of personal financial planning. mutual funds.hsh. 7) Maintaining control over your creditbuying habits will contribute to your financial goals. .com and www.com. INVESTING (CHAPTERS 13–17) While many types of investment vehicles are available. Spending less than you earn is the only way to achieve longterm financial security.eloan. investors who desire long-term growth choose stocks.com. as may both a husband and a wife having similar health insurance coverage.msn.

.com.yahoo. educational expenses. your recreational activities. Becoming informed about tax and investment alternatives will help you expand your financial resources. and possible part-time or volunteer work. IMPLEMENTING YOUR FINANCIAL PLAN You must have a plan before you can implement it. A knowledge of property transfer methods can help you select the best course of action for funding current and future living costs.com.about. however. or use a money management software package. if possible.aarp.com. Exhibit  1-10 offers a framework for developing and implementing a financial plan. and recommends future financial activities. 3.estateplanninglinks. you can obtain assistance at retireplan . bond mutual funds. and collectibles such as rare coins. to minimize the tax burden and maximize the benefits for those receiving the financial resources.org. Having appropriate insurance protection will help you prevent financial disasters. as a result of stock splits and reinvested dividends. RETIREMENT AND ESTATE PLANNING (CHAPTERS 18. Online Sources for Investing “Information is power”—this is especially true when investing. 2. that initial investment was worth $7 million. 19) Most people desire financial security upon completion of full-time employment. Online Sources for Retirement and Estate Planning Whether you are 40 years or 40 minutes away from retiring. real estate. and retirement needs of dependents. seek assistance from a financial planner. DEVELOPING A FLEXIBLE FINANCIAL PLAN financial plan A formalized report that summarizes your current financial situation. But retirement planning also involves thinking about your housing situation. and www. Grace Groner purchased three shares of Abbott Laboratories stock for $180. at the time of her death.24 Part 1 PLANNING YOUR PERSONAL FINANCES You can achieve investment diversification by including a variety of assets in your portfolio—for example. it is more difficult to obtain specific investment advice to meet your individual needs and goals. including the following: 1.com. In 2010. analyzes your financial needs. www. www. analyzes your financial needs.com. These funds were donated to Lake Forest College. and recommends future financial activities. to provide scholarships for foreign study and internships. You can create this document on your own. The main source of financial difficulties is overspending.marketwatch.fool. You can obtain company information and investment assistance at finance. Transfers of money or property to others should be timed. along with examples for several life situations. Obtaining general investment advice is easy. and www. DID YOU KNOW? In 1935. However. where Groner attended school. stocks. Using a well-conceived spending plan will help you stay within your income while you save and invest for the future. A financial plan is a formalized report that summarizes your current financial situation. once you have clearly assessed your current situation and identified your financial goals. what do you do next? The most important strategy for success is to develop financial habits that contribute to both short-term satisfaction and long-term financial security.

gov.com. The Personal Financial Planner sheets provide a framework for creating and implementing your financial activities.gov.federalreserve. www. bloomberg.mhhe. Others can have long-term effects. Achieving your financial objectives requires two things: (1) a willingness to learn and (2) appropriate information sources. For successful financial planning.bls. and be persistent in your efforts to get there.Chapter 1 Personal Finance Basics and the Time Value of Money Financial planning in action for different life situations Within a Year Short -Term Financial Strategies • Create and implement a budget • Pay off credit card debts • Obtain adequate insurance • Establish a regular savings program • Invest in safe. Use the Concept Checks and end-of-chapter activities. •••••••••••••••••••••• Goal: Save for down payment for home purchase • Create and implement budget to allow regular deposits to savings or investment program • Continue investment program to provide for expanded housing needs or emergencies Life situation: Middle-aged person or couple 3.com/kdh) connects you to additional resources and activities. and www. As you move into the following chapters. Goal: Provide for financial needs of parents •••••••••••••••••••••• • Purchase life insurance with parents as beneficiaries • Make monthly payments to mutual funds investment program STUDYING PERSONAL FINANCE Within each chapter of this book are various learning devices to help you build knowledge. All decisions involve risk. save for home purchase 25 Exhibit 1-10 Now Assess your current situation More than a Year from Now Develop financial goals Select appropriate plans of action Long-Term Financial Strategies • Invest in financial instruments for long-term growth • Select tax-deferred investments • Pay off consumer debts and home mortgage Examples Life situation: Single parent 1. You must provide the first element. Information on changing economic conditions is available at www. know where you want to be. . • Use media sources for the latest personal finance information. the material that follows will provide the second. • Talk to others. •••••••••••••••••••••• Goal: Provide $20. incomeproducing financial instruments • Use rental housing. know where you are now. who have knowledge of various money topics.000 college fund in 10 years • Make regular deposits to a savings plan such as certificates of deposit • Obtain life insurance for dependent care in case of premature death Life situation: Young couple 2. Inflation and interest rates will influence your financial decisions. Some risks are minor with limited consequences. experts and friends. • Read and study the book carefully. The Web site (www. we recommend that you: My Life 5 I am able to name specific types of risks that can affect my personal financial decisions. • Search the Web for answers to questions that result from your desire to know more.

in my 50s and beyond • Assess need for long-term health care coverage • Review will and estate plan • Consider various activities.in my 30s and 40s • Assess progress toward long-term financial goals • Evaluate needed insurance as a result of changes in household or financial situation . . . and (3) a person nearing retirement. Action Application Prepare a list of questions that might be asked of a financial planning professional by (1) a young professional starting out on his or her own. . .. . .in my 20s • Pay off any college loans • Increase amounts saved and invested • Continue proper spending and credit habits. locations for retirement. .26 Part 1 PLANNING YOUR PERSONAL FINANCES CONCEPT CHECK 1-5 1 What are the main components of personal financial planning? 2 What is the purpose of a financial plan? 3 Identify some common actions taken to achieve financial goals. . . .. (2) a young couple planning for their children’s education and for their own retirement. . g in nn la P al ci an in F r fo ge ta S ife My L .in college • Develop wise budgeting habits • Create a regular savings program • Establish a plan for wise use of banking services and credit .

Using the Rule of 72. 3) 27 . To calculate the present value of $10. If your money is expected to double in 12 years. KEY TERMS adult life cycle bankruptcy 23 economics 12 24 financial plan 12 future value inflation liquidity 13 22 5 18 personal financial planning present value values 12 18 17 time value of money 2 opportunity cost SELF-TEST PROBLEMS 1. use Exhibit 1-8C. Objective 2 Develop personal financial goals. age. and (4) indicate the type of action to be taken.677 = $6. effort.SUMMARY OF OBJECTIVES Objective 1 Analyze the process for making personal financial decisions. 39 ): $10. and personal values. (2) be stated in specific. (3) identify alternative courses of action. (4) evaluate alternatives. investing. saving. and borrowing strategies based on your personal situation and various social and economic factors. 2. household size. (5) create and implement a financial action plan. Objective 4 Calculate time value of money situations associated with personal financial decisions. Future value and present value calculations enable you to measure the increased value (or lost interest) that results from a saving. especially inflation and interest rates. (2) develop financial goals. Financial opportunity costs are based on time value of money calculations.000.000 × 0. and employment opportunities). 19 (or Exhibit 1-C. investing. When making major financial decisions. Calculating the Future Value of Property. Objective 3 Assess personal and economic factors that influence personal financial planning. (3) have a time frame. use a variety of information sources to implement the personal financial planning process: (1) determine your current financial situation. If that real estate is expected to increase in value by 3 percent each year. or purchasing decision. p. and by economic factors (prices. The financial goals you develop should (1) be realistic. you are earning approximately 6 percent (72 ÷ 12 years = 6 percent). health) Successful financial planning requires specific goals combined with spending. Every decision involves a trade-off with things given up. This rule can also be used to determine your earning rate. what will its approximate value be seven years from now? (Obj. and (6) review and revise the financial plan.770 FINANCIAL PLANNING PROBLEMS (Note: Some of these problems require the use of the time value of money tables in the chapter appendix. what is your rate of return? 2.000 for eight years at 5 percent. interest rates. borrowing. If you desire to have $10. Personal opportunity costs include time.000 in savings eight years from now.) 1. The Rule of 72 provides a guideline for determining how long it takes your money to double. if your money is expected to double in 12 years. and health. Financial goals and financial planning decisions are affected by a person’s life situation (income. Ben Collins plans to buy a house for $220. p. Objective 5 Identify strategies for achieving personal financial goals for different life situations. what amount would you need to deposit in an account that earns 5 percent? Self-Test Solutions 1. measurable terms.

Elaine Romberg prepares her own income tax return each year. The average cost of those same automobiles is now $28. what amount would you need to deposit today? Assume that your money will earn 5 percent. The future value of $450 six years from now at 7 percent. how long will it take for your savings to double? 3.000 a year into her retirement account. saving. and others to determine the process they use when making financial decisions. If these funds have an average earning of 9 percent over the 40 years until her retirement. 7. to be repaid in five equal yearly payments. and borrowing activities changed when they decided to continue their education. what will be the value of her retirement account? (Obj. Calculating the Value of Reduced Spending.000 in savings at an annual interest rate of 2. Calculating the Present Value of Future Cash Flows. Calculating the Present Value of a Series. Tran Lee plans to set aside $2. Analyzing Changing Life Situations.000 with a 5 percent interest rate. Prepare a list of financial planning specialists (investment advisers. how much must be deposited at the start of his studies to be able to withdraw $12.2.) (Obj. Determining a Loan Payment Amount. 4) 9.com.000 now in exchange for annual payments of $10. d. What was the rate of increase for these automobiles between the two time periods? (Obj. If you borrow $8. At an annual interest rate of 5 percent. what amount will the family need for their living expenses after three years? (Obj. and others how their spending. Pete wants to have $12. A financial company advertises on television that they will pay you $60. If he earns 4 percent on his money.000 available each year for various school and living expenses. The future value of $800 saved each year for 10 years at 8 percent. (Obj. how long will it take for property values to double? b. tax preparers) in your community who can assist people with personal financial planning. calculate the following. Researching Economic Conditions. or other Web sites to determine recent trends in interest rates.400 a year for the next six years. 4) 14. insurance agents. Using the rule of 72. (Obj. (Obj. 1. Calculating the Potential Future Value of Savings. Setting Financial Goals. Using Sheet 3 in the Personal Financial Planner. (Obj. Using the Time Value of Money for Retirement Planning. 3) 3. A family spends $36. (Obj. 3) 5.000 a year for three years? (Obj. and (d) a retired person. credit counselors. relatives. 4) a. 4) 11. (Obj. earning 4 percent. relatives. 3) a. c. 3) 5. Determining the Inflation Rate. change careers. real estate brokers. www. Survey friends. 4) FINANCIAL PLANNING ACTIVITIES 1. If the value of land in an area is increasing 6 percent a year. such as The Wall Street Journal. Information about the consumer 28 . Using the Rule of 72. 1) 2. 3) 4. or have children. Calculating the Future Value of a Series of Amounts. b. would you accept this offer? (Obj. Computing the Time Value of Money.000. If you desire to have $20.businessweek. The amount a person would have to deposit today to be able to take out $500 a year for 10 years from an account earning 8 percent. If a person spends $15 a week on coffee (assume $750 a year). What would be the yearly earnings for a person with $8. 4) 10.000. 4) 6.000 a year for living expenses.000 that you are expected to receive for a legal settlement over the next 10 years. A tax preparer would charge her $80 for this service. selected automobiles had an average cost of $16. how much does Elaine gain from preparing her own tax return? Assume she can earn 3 percent on her savings. If prices increase by 2 percent a year for the next three years. Using Financial Planning Experts. Ask friends. what would be the future value of that amount over 10 years if the funds were deposited in an account earning 3 percent? (Obj. 4) 12. create one short-term and one long-term goal for people in these life situations: (a) a young single person. 2) 4. Carla Lopez deposits $3. (b) a single parent with a child age 8. approximate the following amounts. Comparing Financial Planning Actions. what would be the amount of each payment? (Note: Use the present value of an annuity table in the chapter appendix. how long will it take for your money to double? c. Using time value of money tables. In 2000. inflation. Calculating Earnings on Savings. Pete Morton is planning to go to graduate school in a program of study that will take three years. (c) a married person with no children. Over a period of 10 years. 4) 8. (Obj. How do these people measure risk when making financial decisions? (Obj. Use library resources. The amount a person would have to deposit today (present value) at a 6 percent interest rate to have $1.000 for a down payment for a house in five years.000 five years from now. Computing Future Living Expenses. If you earn 10 percent on your investments. 4) 13. What would be the future value of this savings amount? (Obj.5 percent? (Obj. If you estimate the time value of money at 10 percent. and other economic indicators. Calculating the Time Value of Money for Savings Goals.

What actions would be necessary to compare a financial planner who advertises “One Low Fee Is Charged to Develop Your Personal Financial Plan” and one that advertises “You Are Not Charged a Fee.bls. Savings—set aside money for a down payment on a house.” Kevin said. Recovering herself. “You might be tempted to buy on impulse instead of spending the money on things with lasting value. What actions do you recommend that Nina take before making a final decision about the use of these funds? PERSONAL FINANCIAL PLANNER IN ACTION Starting Your Financial Plan Planning is the foundation for success in every aspect of life. still in a little bit of shock.about. Long-term investments—invest the money in a tax-deferred retirement account.com PFPSheet 4 www. I could easily use $100. Report how this economic information might affect your financial planning decisions. 2 www. 3) 6. “So what should I do?” “Some financial advisors recommend not doing anything for at least 6 months. she discovered a wonderful surprise. interest rates) to determine possible actions to take related to your personal finances. (Obj.price index (measuring changes in the cost of living) may be obtained at www. “I wonder what I should do with the money?” “Oh.com PFPSheet 3 http://financialplan. 4.000!” Nina laughed. Assessing your current financial situation.” Nina shrugged. 3. Comparing Alternative Financial Actions. Your Short-Term Financial Planning Activities 1.gov www. Nina teased. “I guess her investments have increased in value by much more than she needs.moneycentral. My Services Are Covered by the Investment Company for Which I Work”? (Obj.000!” “Why would she do that?” mused Kevin. Based on various financial goals. Career training—use the money for technology certification courses to enhance her earning power. Identify various financial planning actions for you and other household members for the next two to five years. “Wow. She wants to share it with family members.com 29 . 5) FINANCIAL PLANNING CASE Now What Should I Do? When Nina opened the letter from her aunt.” After some discussion. Prepare a list of personal and financial information for yourself and family members. 2. I just thought I’d offer some ideas.federalreserve. “Hey.dinkytown.com www. I have some suggestions for you .bls. calculate the savings deposits necessary to achieve those goals. How might time value of money calculations be used by Nina in her decision-making process? 3. . Community donations—contribute funds to a homeless shelter and a world hunger-relief organization.000 instead of $12.gov Resources PFP Sheet 5 www. “Wait a minute! When did this become our money?” Kevin threw his hands in the air.money. Resources PFP Sheets 1. Nina considered the following uses for the money: Credit card debt—use a portion of the money to pay off credit card bills from her last vacation.msn. Monitor current economic conditions (inflation. Also create a list of financial service organizations that you use.kiplinger. along with setting goals is the key to successful financial planning. Set financial goals related to various current and future needs.” “Well now I’m really not sure what to do!” Questions 1.gov. “My aunt has given me a gift of $12. 2. Your Long-Term Financial Planning Activities 1. Which additional information might be necessary to know about Nina before determining which areas of financial planning should be her top priority? 2.” warned Kevin. .net Text pages www.

This experience will help you better understand your spending patterns and identify desired changes you might want to make in your spending habits. Using the “Daily Spending Diary” sheets. While at first the process may seem tedious. However.300. but the information has helped me become much more careful of how I spend my money. Shelby has been living with a roommate (Melinda) in an apartment near her work in order to reduce her living expenses.750 Living expenses $1. a digital camera ($50). list various personal financial decisions that Shelby may be considering at this point in her life.550) that gets great gas mileage. a laptop computer ($400). she continually uses her credit card to make ends meet.mhhe. dresser. Describe what short-term.000 Student Loan $3. clothing ($300). How might your Daily Spending Diary assist you when identifying and achieving financial goals? The daily spending diary sheets are located in Appendix C at the end of the book and on the student Web site www.CONTINUING CASE Getting Started Life Situation Single Age 21 No dependents College student Financial Data Monthly income $1.400 Shelby Johnson has a flair for grooming dogs an cats. recording this information becomes easier and faster.000 Credit Card Debt $2. lamp.com/kdh 30 .” Directions Nearly everyone who has taken the effort to keeping a Daily Spending Diary has found it beneficial. 2. She hopes to open her own pet Salon when she graduates college. a television set with a DVD player ($400). Given her current situation. She is currently completing her sophomore year in business while working at a local pet store. Questions 1.300 Saving $2. couch) with a total value of $7. Or you may create your own format to monitor your spending. Analysis Questions 1. What did your Daily Spending Diary reveal about your spending habits? What areas of spending might you consider changing? 2. after awhile.210 Personal Property $7. What types of time value of money calculations would be helpful for Shelby? DAILY SPENDING DIARY “I first thought this process would be a waste of time. record every cent of your spending each day in the categories provided. clock. and some furnishings valued at $600 (bed. 3. You can indicate the use of a credit card with (CR). intermediate and long-term goals Shelby should develop using the “Setting Personal Financial Goals” worksheet located at the back of this book. Her personal property consists of a 2005 car ($5.

how much will I have for a down payment on a house in five years?” “Will $2. because the dollar received today can be saved or invested and will be worth more than a dollar a year from today. the cost of using an apartment or other item. which is calculated through a process called discounting. Similarly. is the current value of a future sum based on a certain interest rate and period of time. a dollar that will be received one year from today is currently worth less than a dollar today. is the cost of money that is borrowed or lent. Present value. you are given an amount to save or invest and you calculate the amount that will be available at some future date.000 saved each year give me enough money when I retire?” “How much must I save today to have enough for my children’s college education?” The time value of money. Interest Rate Basics Simple interest is the dollar cost of borrowing or the earnings from lending money. The time value of money is based on the fact that a dollar received today is worth more than a dollar that will be received one year from today. The time value of money has two major components: future value and present value. Future value computations. In future value problems.1 Appendix: The Time Value of Money: Future Value and Present Value Computations “If I deposit $10. The interest is based on three elements: • The dollar amount. The formula and financial calculator computations are as follows: Interest Rate Basics Formula Interest = Principal × Rate of interest (annual) × Time (years) Financial Calculator* . called the principal. yield the amount to which a current sum will increase based on a certain interest rate and period of time. Interest can be compared to rent. more commonly referred to as interest. you are given the amount that will be available at some future date and you calculate the current value of that amount. Both future value and present value computations are based on basic interest rate calculations.000 today. • The amount of time. which are also referred to as compounding. • The rate of interest. With present value problems.

how much interest would you earn in nine months? You would compute this amount as follows: Interest = $750 × 0.com.000 at 5 percent and will repay it in one payment at the end of one year. Interest for 2½ years would involve a time period of 2.33 Future value tables are available to help you determine compounded interest amounts (see Exhibit 1-A on page 36). For example. three months would be shown as 0. you can see that $1 would be worth $1.33. or 1/4 of a year. computed as follows: $50 = $1.) SAMPLE PROBLEM 2 How much interest would you pay to borrow $670 for eight months at 12 percent? Future Value of a Single Amount The future value of an amount consists of the original amount plus compound interest. the interest is $50.33 at that time. Looking at Exhibit 1-A for 10 percent and three years. I/Y . 3 N . For example. TVMCalcs. 795 ‒ 750 = 45 *(Note: These financial calculator notations may require slightly different keystrokes when using various brands and models.21 FV = $1. CPT FV 1.33 = $1. 8 I/Y .08 × 3/4 (or 0.75 of a year) = $45 ‒750 PV .33 ) 1 PV . 0 PMT .05 × 1 (year) Example B: If you deposited $750 in a savings account paying 8 percent.12 or 12/100 before doing your calculations. Using the simple interest calculation. PMT . multiply the table factor by the original amount.33 (rounded) Interest $0. 9/12 = .25. 10 I/Y . CPT FV 795.75 N . N .33 = $( 1.) SAMPLE PROBLEM 1 How much interest would you earn if you deposited $300 at 6 percent for 27 months? (Answers to sample problems are on page 35.11 Interest $0.000 × 0. This calculation involves the following elements: FV = Future value PV = Present value i = Interest rate n = Number of time periods The formula and financial calculator computations are as follows: Future Value of a Single Amount Formula FV = PV( 1 + i )n Table FV = PV ( Table factor ) Financial Calculator PV .001 + 0. The time element must also be converted to a decimal or fraction.10 $1. Example A: Suppose you borrow $1.00( 1.10 Interest $0. For other amounts. CPT FV Example C: The future value of $1 at 10 percent after three years is $1. you must convert 12 percent to either 0. This process may be viewed as follows: Future value $1 $1.12 After year 0 1 2 3 . This amount is calculated as follows: $1.0 PMT .5. see www.32 Part 1 Formula PLANNING YOUR PERSONAL FINANCES Financial Calculator* The interest rate is stated as a percentage for a year.10 )3 Using Exhibit 1-A: $1.

21 2 3 Example F: If you plan to deposit $40 a year for 10 years.31 $1 Deposit $1 Interest 0 1 −1 PMT . the future value of this amount is: $40(1 + 0. compounded semiannually? Future Value of a Series of Equal Amounts (an Annuity) Future value may also be calculated for a situation in which regular additions are made to savings. the future value would be: $478. Example E: The future value of three $1 deposits made at the end of the next three years. 10 N . PV .08)10 –1 $579. 10 I/Y .5 × 12 = 18 N .487) −40 PMT . 0 PV . I/Y . (2) the interest rate is the same for each time period.10 FV = $3. This is calculated as follows: (1 + 0. CPT FV 478. 12/12 = 1 I/Y .196 ) 400 PV .46 = $400( 1 + 0. CPT FV This calculation assumes that (1) each deposit is for the same amount. earning 10 percent interest.31 Deposit $1 Deposit $1 Interest $0.01 )18 $478.Appendix Formula The Time Value of Money Table Financial Calculator 33 Example D: If your savings of $400 earns 12 percent. 1.10 Interest $0. earning 8 percent compounded annually. The formula and financial calculator computations are as follows: Future Value of a Series of Payments Formula (1 + i ) n – 1 FV = Annuity ___________ i Table Using Exhibit 1-B: Annuity × Table Factor Financial Calculator PMT . over a year and a half.31 $2.48 = $40(14. CPT FV 3.40 = $400( 1.31.10)3 – 1 $3. use the table factor for 1 percent for 18 time periods.46 SAMPLE PROBLEM 3 What is the future value of $800 at 8 percent after six years? SAMPLE PROBLEM 4 How much would you have in savings if you kept $200 on deposit for eight years at 8 percent.31= $1______________ 0. 3 N .31 = $1 × 3. 10 I/Y . CPT FV 579. 0 PMT . is $3. compounded monthly.46 SAMPLE PROBLEM 5 What is the future value of an annual deposit of $230 earning 6 percent for 15 years? . and (3) the deposits are made at the end of the each time period.46 = ________________ 0. 0 PV .10 This may be viewed as follows: Future value (rounded) After year 0 Using Exhibit 1-B: $3. N .08 Using Exhibit 1-B $579.

compounded annually? Present Value of a Single Amount If you want to know how much you need to deposit now to receive a certain amount in the future. 7 × 2 = 14 N .34 Part 1 PLANNING YOUR PERSONAL FINANCES SAMPLE PROBLEM 6 What amount would you have in a retirement account if you made annual deposits of $375 for 25 years earning 12 percent. 0 PMT .05)14 Using Exhibit 1-C: $151.0905 After year 0 1 2 3 Present value tables are available to assist you in this process (see Exhibit 1-C on page 38).200 earning 15 percent for eight years? SAMPLE PROBLEM 8 To have $6.75131 This may be viewed as follows: Future value $0. CPT PV Example G: The present value of $1 to be received three years from now based on a 10 percent interest rate is calculated as follows: $1 $0.75 = $1(0.75.52 SAMPLE PROBLEM 7 What is the present value of $2.75 = ___________ (1 + 0. PMT . 0 PMT .75 $0. compounded semiannually (which would be 5 percent for 14 time periods). finding how much you would have to deposit today is calculated as follows: $300 15$151. I/Y . 3 N .505) 300 FV . 10/2 = 5 I/Y . 10 I/Y . CPT PV — 151. the formula and financial calculator computations are as follows: Present Value of a Single Amount Formula FV PV = _______ (1 + i )n Table Using Exhibit 1-C: PV = FV(Table Factor) Financial Calculator FV .0825 $0.91 $1 (rounded) Discount (interest) Discount (interest) Discount (interest) $0.751) 1 FV . compounded quarterly? .075 $0. For amounts other than $1.52 = ___________ (1 + 0. N . multiply the table factor by the amount involved. CPT PV — . Notice that $1 at 10 percent for three years has a present value of $0.10)3 Using Exhibit 1-C: $0.000 for a child’s education in 10 years.50 = $300(0.83 $0. what amount should a parent deposit in a savings account that earns 12 percent. Example H: If you want to have $300 seven years from now and your savings earn 10 percent.

49 = $1 0. compounded annually. for money earning 10 percent.Appendix The Time Value of Money 35 Present Value of a Series of Equal Amounts (an Annuity) The final time value of money situation allows you to receive an amount at the end of each time period for a certain number of periods. 10 I/Y . To use the table for other situations.48685 This may be viewed as follows: Present value $2.14 )10 ______________ $521.487 ) 1 PMT .10 )3 _____________ $2.216) 100 PMT . 0 FV . 0 FV . FV .25 Interest + $0. CPT PV — 521. I/Y . N .91 $0 (fund balance) Withdrawal – $1 Withdrawal – $1 Withdrawal – $1 Interest + $0. Example J: If you wish to withdraw $100 at the end of each year for 10 years from an account that earns 14 percent. 10 N . CPT PV Example I: The present value of a $1 withdrawal at the end of the next three years would be $2. multiply the table factor by the amount to be withdrawn each year.14 ( ) Using Exhibit 1-D: $521. what amount must you deposit now? 1 1– ___________ ( 1 + 0.74 $0. 3 N .10 [ ] Using Exhibit 1-D: $2.49 $1.17 Interest + $0.49 = $1( 2.49. CPT PV — 2. This would be calculated as follows: 1 1– ___________ ( 1 + 0. The formula and financial calculator computations are as follows: Present Value of a Series of Payments Formula 1 1– _______ ( 1 + i )n PV = Annuity × __________ i Table Financial Calculator Using Exhibit 1-D: PV = Annuity ( Table Factor ) PMT .61156 SAMPLE PROBLEM 9 What is the present value of a withdrawal of $200 at the end of each year for 14 years with an interest rate of 7 percent? SAMPLE PROBLEM 10 How much would you have to deposit now to be able to withdraw $650 at the end of each year for 20 years from an account that earns 11 percent? Using Present Value to Determine Loan Payments Present value tables can also be used to determine installment payments for a loan as follows: .09 After year 0 1 2 3 This same amount appears in Exhibit 1-D on page 39 for 10 percent and three time periods.61 = $100 0. 14 I/Y .60 = $100(5.

40 periods.576.25 years (27 months) = $40.847.) $375(133.47) .175. how much will it be worth in five years? (Answer: $2.75. (Future value of a single amount) If you deposit $2. (Future value of an annuity) If. instead.307) = $1. CPT PMT ‒ 374.673 1000 PV .327) = $719.07) 3.52) 6.) $200(1.38.10981 SAMPLE PROBLEM 11 What would be the annual payment amount for a $20. 8 periods.200(0. $670 × 0. (Use Exhibit 1-A. 8.000 and an interest rate of 6% (applied to the principal until disbursed)? (Answer: $166.000 in a 5-year certificate of deposit at 5. (Use Exhibit 1-B.2% with quarterly compounding. CPT PMT Example K: If you borrow $1. 7.000(0. assuming a rate of interest of 7%? (Answer: $4. 12%. how much will it be worth in five years? (Answer: $2.000 with a 6 percent interest rate to be repaid in three equal payments at the end of the next three years. Find monthly the payment. 11%. (Present value of an annuity) You wish to borrow $18. the payments will be $374.) $20. (Future value of a single amount) If you deposit $2.000 to buy a new automobile. assuming an annual cost of $48.745) = $1. FV . Assuming an annual rate of return of 9%.35) 4. 11. $800(1. 15 periods. 14 periods. 6. 3 N . 8%. (Use Exhibit 1-C. (Use Exhibit 1-D.589. (Present value of a single amount) How much money must you set aside at age 20 to accumulate retirement funds of $100.000 in a 5-year certificate of deposit at 5. 10-year loan at 7 percent? Answers to Sample Problems 1.11. (Future value of an annuity) You choose to invest $50/month in a 401(k) that invests in an international stock mutual fund. 7%. (Use Exhibit 1-A. 4%.50.60. 2.000/7.761.024 = $2. I/Y . 15%.) $2.066.36 Part 1 PLANNING YOUR PERSONAL FINANCES Present Value to Determine Loan Payments Table Amount borrowed ______________________________________________ = Loan payment Present value of a series table factor (Exhibit 1-D) Financial Calculator PV . 9.963) = $5. 16 periods.95.40.749. 3.269. 6 I/Y .97) 5.000 _______ = $374.842.873) = $374.587) = $1. (Use Exhibit 1-C.) $200(8.6% over five years with monthly payments.325.) $230(23.52) 2. $300 × 0. 6 periods.60.) $6. 0 FV . (Use Exhibit 1-D. how much will this fund worth if retiring in forty years? (Answer: $202. (Use Exhibit 1-D. 5. (Present value of an annuity) How much money must your rich uncle give you now to finance four years of college.01) 7. N .998. 10 periods.276) = $5.000.06 × 2. Time Value of Money Application Exercises 1. 6%.353. (Use Exhibit 1-B.60.33) = $49. how much will this fund worth if retiring in forty years? (Answer: $234. 20 periods.11 2.000 at age 65. Rate is 8. you invest $600/Year in a 401(k) that invests in an international stock mutual fund. Assuming an annual rate of return of 9%. 10.729. This is calculated as follows: $1. 25 periods. 4.12 × 2/3 (of a year) = $53. (Answer: $444. 7%. 3%.48.2%.) $650(7.

498 3.570 Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 40 50 12% 1.316 4.305 2.504 1.409 74.244 22.170 1.488 2.539 1.785 5.133 2.000 36.335 4.574 1.082 1.066 3.436 2.397 2.422 35.887 5.220 1.212 267.231 39.800 9.180 1.677 1.527 2.410 2.292 2.611 1.083.791 1.127 1.292 5.147 11.952 3.790 7.070 533.953 2.172 2.594 2.672 19.030 1.895 6.050 705.278 3.368 1.980 2.176 7.565 3.693 2.183 2.601 1.177 4.854 3.476 2.232 1.260 1.000 70.685 2.692 1% 1.606 1.159 2.340 1.960 7.523.076 8.185 3.870 2.521 1.948 38.927.420 13.998.630 1.190 1.839 15.886 7.590 16.759 4.646 17.409 55.106 3.680 1.107 5% 1.670.254 7.925 2.192 2.346 1.277 1.288 39.558 1.457 8% 1.211 2.225 1.886 1.948 2.560 6.826 3.294 1.288 2.142 5.563 1.700 5.267 1.689 1.575 12.713 4.051 289.000 29.518 1.919 66.645 3% 1.064 9.929.100.974 14.338 95.815 4.430 8.400 1.870 2.265 1.623 13.219 1.551 1.051.188 1.685 1.950 188.552 18.874 2.369 1.423 1.583 4.939 2.020 1.369 1.690 8.580 7.062 1.853 3.457 1.200 30% 1.469 1.196 1.613 9.173 1.960 93.105 2.126 1.024 10.195 2.070 1.316 1.322 7.116 1.587 1.300 5.773 3.743 10.153 7.380 1.150 1.040 11.353 2.005 2.427 7.086 18.988 9.970 4.405 1.050 1.120 1.082 1.358 10% 1.266 10.604 8.761 12.232 16.331 1.152 3.380 3.986 9.313 2.379 4.428 1.190 22.777 19.158 1.737 28.883 4.138 3.210 1.001 184.717 5.718 1.298 30.323 1.149 1.511 69.827 6.159 1.811 2.374 51.252 2.157 10.403 1.642 14.426 16.367 2.624 6.856 3.596 11.523 21.435 5.949 2.060 1.358 10.010 1.602 1.462 50.504 112.489 1.566.072 1.126 1.623 31.518 4.728 2.873 1.243 4.000 .161 1.736 264.479 3.276 8.407 1.313 11.129 16.689 1.140 1.896 4.839 3.396 237.160 6.160 1.138 1.699 12.250 1.191 2.386 2.367 32.464 1.288 8.192 7.707 4.461 40.835 17.595 5.879 19.106 50.669 143.054 5.813 3.513 1.011 2.740 14% 1.661 6.580 2.234 6.300 1.226 4.348 1.116 132.451 9.195 1.561 1.200 1.170 1.807 5.346 1.803 4.259 117.426 1.001 3.110 1.449 45.806 2.305 1.083 1.642 3.468 14.653 1.460 146.079 2.041 1.762 1.172 1.604 13.000 13% 1.103 1.848 10.412 1.091 27.696 6.796 1.702 1.107 2.384 4% 1.311 1.850 378.261 7.144 2.262 1.898 5.186 26.350 6.768 5.370 750.400 25% 1.407 2.393 62.130 6.108 4.658 3.197 2.004 3.375 14.094 1.811 2.594 1.062 13.282 1.486 1.732 1.429 77.276 10.080 1.452 3.268 1.117 5.720 2.999 2.643 1.539 12.094 2.714 1.230 1.936 6.838 1.612 14.100 1.558 2.700 807.046 4.853 3.124 1.360 1.511 4.007 10.116 6.344 1.666 3.197 11.262 4.488 22.059 3.482 1.658 111.000 497.407 18.200 18% 1.629 1.190 190.300 1.785 5.386 4.700 17% 1.217 1.020 1.700 3.743 26.230 15% 1.261 2.026 2.389 86.243 1.748 23.194 1.477 1.870 5.653 3.851 1.093 1.332 2.172 3.207 4.441 3.759 2.319 1.797 4.263 8.502 2.480 1.056 13.427 3.725 46.061 1.492 6.665 1.172 19.021 4.125 1.518 2.443 1.191 1.390 11% 1.149 1.993 2.358 2.544 7.539 1.159 3.836 4.416 1.065.700 16% 1.419 1.974 29.463 16.384 1.727 10.474 6.411 5.996 4.342 3.640 2.699 9.599 10.166 1.866 7.620.214 27.400 19% 1.090 1.184 1.216 1.137 9.252 32.254 1.295 1.902 9% 1.937 3.900 20% 1.040 1.922 23.426 3.145 1.063 21.469 1.641 1.786 17.842 2.082 2.860 1.330 14.Appendix The Time Value of Money 37 Exhibit 1-A Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 40 50 Future value (compounded sum) of $1 after a given number of time periods 2% 1.395 3.673 23.749 2.542 86.208 2.585 22.311 5.986 3.777 8.874 85.420 7% 1.276 1.130 1.392 1.104 1.105 1.268 31.898 2.137 9.892 65.469.828 1.579 2.076 2.074 2.818 5.967 2.880 700.252 3.030 1.780 450.840 3.660 3.772 1.067 7.710 1.380 3.138 8.338 1.690 2.310 4.026 3.748 12.363 4.388 184.754 1.605 1.974 2.328 4.186 66.208 1.617 3.801 7.012 2.440 1.527 44.916 10.100 2.061 1.700 3.652 5.540 2.052 3.373 1.467 6% 1.119.040 1.801 1.720 1.535 6.501 1.051 1.

129 27.439 120.740 123.969 91.811 22.348.850 96.396 56.520 483.301 46.050 273.974 41.089 12.290 218.210 19% 1.506 5.683 13.461 199.304 24.673 84.394 9.637 12.091 4.950 1.261 79.000 2.530 8% 1.000 2.488 14.877 8.412 22.38 Part 1 PLANNING YOUR PERSONAL FINANCES Exhibit 1-B Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 40 50 Future value (compounded sum) of $1 paid in at the end of each period of a given number of time periods (an annuity) 2% 1.040 3.462 11.030 40.440 4.027 12.985 34.800 209.660 60.515.080 3.579 15.825 23.000 2.118 68.700 5.800 20% 1.141 22.369 10.497 59.606 5.841 24.750 37.330 241.637 6.578 14.701 136.762 73.090 1.140 3.153 8.830 1.900 30.066 6.549 11.030 3.567 12.900 25% 1.000 2.480 8.923 10.340 7% 1.120 3.690 138.505 47.600 790.066 47.913 9.867 7.025 181.645 18.110 173.180 3.436.900 11% 1.990 6.580 55.204 6.506 5.086 23.641 6.207 15.026 152.573 5.575 75.000 767.739 61.977 11.760 36.420 21.999 37.500 4.491 13.028 13.014 9.404 47.000 2.000 80.930 12.293 18.290 130.000 45.110 66.440 212.742 8.850 36.170 2.000 2.925 71.132 30.000 2.250 3.159 11.029 32.786 43.599 20.374 4.727 16.646 56.414 25.500 7.566 54.640 218.499 20.160 3.521 28.110 647.950 40.953 26.054.000 2.993 6.760 290.375 5.836 88.523 27.208 68.923 24.000 2.110 3.089.588 60.757 15.154 9.980 59.405 74.850 6.280 259.000 2.442 12.615 20.141 98.310 337.459.259 15.361 33.725 70.000 31.212 30.070 3.713 19.970 630.434 8.751 7.790 434.906 33.404 37.668.440 5.410 146.939 64.150 39.164 16.207 11.019 28.710 6.246 4.035 87.959 32.310 2.000 165.883 40.095 34.342.212 102.947 16.610 8.187 9.292 20.947 155.068 103.309 6.870 356.190 3.430 19.599 21.169 13.089 37.523 15.980 1.012 21.000 15.886 64.800 17% 1.321 25.800 8.976.487 11.890 815.772 35.463 3% 1.152 7.680 15.323 10.655 24.352 40.085 19.286 9.000 1.921 6.814 25.640 406.000 2.842 25.572 5.045 27.215 7.939 87.020 581.799 25.786 20.200 3.620 293.750 63.300 14.115 10.773 18.000 2.716 9.816 15.590 1.545 45.662 8.350 6% 1.730 13.760 86.181 14.978 13.749 80.937 18.414 14.402 84.549 20.539 33.030 4.180 45.343.276 25.698 25.892 10.000 2.000 2.013.727 66.308 7.755 34.459 47.157 21.501 50.105 7.888 20.040 966.657 25.219 50.865 79.200 32.672 53.772 14.640 5.213 30.673 20.000 2.776 17.002 34.930 128.560 342.884 55.058 154.120 154.210 530.249 94.006 13.779 6.243 34.950 12.770 9% 1.526 6.122 5.802 8.473 4.214 10.393 27.393 37.193 17.529.440 3.163.214 8.240 17.753 48.163.233 16.974 17.410 199.400.417 46.022 115.972 16.256.902 19.436 13.840 33.015 42.531 21.486 15.931 42.192 15.888 30.979 93.740 186.416 6.030 292.353 8.985 7.785 48.802 33.599 51.778 41.141 22.000 2.019 29.349 29.755 10.010 371.153 4.639 20.464 12.060 4.800 4% 1.080 10% 1.003 36.330 13% 1.630 342.882 21.995 63.106 113.808 14.750 16% 1.898 9.649 78.523 9.416 18.310 5.258 18.407 4.130 3.159 57.670 5% 1.625 127.633 7.228 7.142 15.000 2.870 36.519 21.654 10.539 5.910 167.297 32.133 28.975 8.384 24.497.073 19.790 15% 1.152 30.495 24.244 54.840 28.368 7.085 95.000 2.160 84.842 50.010 3.700 1.052 133.618 17.579 23.310 4.405 39.170 3.026 16.671 29.561 22.917 17.717 65.000 2.809 14.200 11.271 32.215 27.841 66.733 30.020 3.142 9.581 48.170 165.275 98.150 3.024 21.337 23.090 3.215 4.101 6.086 18.490 442.217.619 56.949 109.650 29.200 14% 1.100 3.701 30.000 3.786 54.043 12.000 2.722 19.336 8.141 7.015 23.818 60.627 18.730.401 112.000 21.700 10.870 18.060 573.117 26.754 11.050 3.442 105.583 9.950 4.227.603 115.440 72.683 12.184 4.762 23.018 51.581 43.779.579 1% 1.200 30% 1.975 31.342 4.583 12.360.253 42.756 17.291 7.470 285.100 7.500 18% 1.196 72.270 138.297 9.000 2.060 3.067 13.858 32.412 14.536 10.977 21.824 39.442 9.800 3.550 25.280 42.406 110.994.097 17.784 17.393.021 15.000 120.347 164.446 45.713 26.134.181.487 16.897 11.278 4.916 16.813 5.075 75.327 19.394 78.405 12.184 5.859 14.783 11.190 44.000 2.379 40.645 27.324 33.468 4.000 2.672 51.285 22.560 20.800 Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 40 50 12% 1.246 5.000 .122 4.380 249.965 72.813.260 11.583 23.450 41.766 8.060 5.690 471.300 3.103 56.207 11.327 97.420 402.203 114.090.

826 0.701 0.364 0.296 0.305 0.006 0.640 0.091 0.074 0.123 0.232 0.181 0.728 0.010 0.243 0.352 0.743 0.104 0.971 0.003 0.270 0.009 0.400 0.033 0.108 0.500 0.751 0.131 0.088 0.741 0.475 0.467 0.592 0.386 0.554 0.043 0.187 0.112 0.153 0.031 0.377 0.711 0.149 0.397 0.672 0.621 0.822 0.583 0.191 0.044 0.056 0.842 0.078 0.925 0.286 0.001 0 0 0 0 0 0 .943 0.233 0.180 0.572 0.047 0.444 0.083 0.198 0.980 0.370 0.926 0.231 0.015 0.896 0.026 0.331 0.258 0.943 0.340 0.132 0.098 0.437 0.694 0.080 0.877 0.942 0.045 0.661 0.074 0.855 0.481 0.021 9% 0.008 0.743 0.833 0.650 0.596 0.299 0.828 0.534 0.233 0.095 0.051 0.081 0.025 0.057 0.747 0.820 0.247 0.624 0.087 6% 0.962 0.116 0.455 0.001 17% 0.677 0.871 0.228 4% 0.534 0.478 0.703 0.391 0.162 0.372 1% 0.296 0.535 0.388 0.285 0.494 0.731 0.587 0.092 0.980 0.275 0.905 0.159 0.605 0.368 0.731 0.178 0.031 0.350 0.009 0.097 0.339 0.952 0.519 0.642 0.864 0.208 0.322 0.002 0 18% 0.002 14% 0.170 0.623 0.204 0.111 0.333 0.108 0.011 0.104 0.760 0.410 0.630 0.352 0.746 0.499 0.476 0.887 0.317 0.023 0.735 0.095 0.099 0.026 0.712 0.067 0.261 0.295 0.016 0.231 0.570 0.088 0.577 0.044 0.885 0.909 0.356 0.059 0.914 0.585 0.005 12% 0.794 0.456 0.890 0.116 0.497 0.404 0.225 0.388 0.460 0.182 0.547 0.001 0.453 0.022 0.502 0.137 0.093 0.659 0.567 0.780 0.627 0.847 0.510 0.296 0.424 0.552 0.375 0.700 0.168 0.456 0.513 0.069 0.073 0.797 0.160 0.287 0.452 0.020 0.673 0.208 0.059 0.011 0.051 0.015 0.666 0.888 0.176 0.208 0.593 0.681 0.Appendix The Time Value of Money 39 Exhibit 1-C Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 40 50 Present value of $1 to be received at the end of a given number of time periods 2% 0.295 0.001 0 20% 0.422 0.326 0.013 10% 0.146 0.844 0.667 0.718 0.376 0.284 0.001 15% 0.093 0.933 0.004 0.705 0.164 0.307 0.005 0.681 0.766 0.205 0.005 0.194 0.497 0.218 0.508 0.050 0.140 0.125 0.482 0.094 0.512 0.015 0.001 0 25% 0.232 0.675 0.857 0.060 0.195 0.901 0.069 0.001 0 0 0 40% 0.417 0.043 0.402 0.249 0.714 0.820 0.111 0.017 0.543 0.469 0.035 0.184 0.480 0.099 0.020 0.186 0.549 0.907 0.266 0.314 0.804 0.141 0.263 0.614 0.001 0 0 30% 0.003 0.410 0.067 0.038 0.893 0.744 0.961 0.229 0.239 0.116 0.608 3% 0.840 0.073 0.030 0.163 0.035 0.215 0.134 0.002 0.406 0.138 0.320 0.037 0.003 0.351 0.350 0.416 0.889 0.012 0.816 0.004 0.001 0 19% 0.269 0.060 0.706 0.198 0.026 0.788 0.564 0.530 0.048 0.250 0.008 0.130 0.915 0.552 0.540 0.390 0.722 0.300 0.071 0.123 0.444 0.062 0.555 0.006 0.623 0.429 0.209 0.879 0.018 0.935 0.122 0.061 0.923 0.013 0.861 0.790 0.713 0.836 0.558 0.436 0.004 0.371 0.039 0.870 0.163 0.087 0.005 0.625 0.319 0.003 Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 40 50 13% 0.148 0.257 0.107 0.609 0.174 0.855 0.361 0.301 0.051 0.252 0.178 0.160 0.260 0.579 0.769 0.951 0.613 0.209 0.686 0.456 0.188 0.658 0.317 0.012 0.683 0.124 0.054 7% 0.038 0.419 0.162 0.870 0.033 0.141 5% 0.593 0.758 0.069 0.142 0.789 0.800 0.141 0.210 0.059 0.853 0.194 0.084 0.396 0.906 0.645 0.769 0.068 0.044 0.014 0.263 0.756 0.043 0.227 0.505 0.168 0.513 0.034 8% 0.020 0.037 0.270 0.237 0.223 0.231 0.046 0.009 0.676 0.001 0 0 0 35% 0.708 0.335 0.262 0.784 0.081 0.354 0.873 0.862 0.145 0.037 0.463 0.028 0.012 0.124 0.009 11% 0.107 0.002 0.942 0.434 0.025 0.032 0.065 0.601 0.020 0.823 0.412 0.425 0.146 0.650 0.813 0.005 0.333 0.432 0.415 0.212 0.376 0.075 0.961 0.990 0.840 0.507 0.003 0.007 0.557 0.002 0.183 0.693 0.592 0.885 0.258 0.123 0.001 16% 0.290 0.027 0.714 0.731 0.837 0.362 0.308 0.152 0.005 0.012 0.130 0.277 0.350 0.544 0.582 0.095 0.002 0.394 0.279 0.636 0.312 0.018 0.015 0.475 0.482 0.812 0.665 0.315 0.054 0.052 0.917 0.125 0.070 0.007 0.207 0.515 0.008 0.093 0.783 0.837 0.024 0.292 0.002 0.013 0.527 0.135 0.165 0.641 0.133 0.055 0.086 0.863 0.763 0.458 0.773 0.853 0.592 0.971 0.610 0.215 0.001 0 0 0 0 50% 0.742 0.792 0.442 0.005 0.327 0.924 0.772 0.

486 5.456 2.296 11.862 1.847 1.583 5.047 6.316 3.162 5.995 3.207 4.496 7.122 6.566 2.690 3.325 8.274 3.000 30% 0.943 8.584 5.486 4.387 4.575 11.162 8.943 1.497 2.938 6.857 40% 0.808 32.997 2.942 3.145 6.643 2.191 7.626 2.426 5.814 7.564 4.963 8.133 15% 0.199 3.019 3.948 1.344 4.844 2.379 2.656 3.566 9.904 8.304 3.723 3.166 2.210 2.628 6.970 2.741 1.974 3.216 5.601 6.336 10.656 4.146 5.652 8.477 10.111 8.585 2.554 19% 0.249 3.463 3.004 13.447 9.147 3.163 4.330 7.534 5.847 5.784 4.531 3.515 7.514 9.885 1.550 6.849 2.840 1.710 7.528 2.971 1.713 2.838 11.322 2.108 7.220 2.853 5.767 5.954 3.342 5.925 3.962 10% 0.690 12.851 9.600 23.779 9.675 14% 0.240 3.559 8.747 6.993 4.265 6.799 5.997 4.675 11.980 1.396 27.111 4.108 9.877 17.197 5.495 6.414 2.127 3.259 6.605 3.743 3.306 8.986 10.335 5.954 6.304 Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 40 50 13% 0.717 4.085 12.134 13.606 7.475 5.667 1.624 3.435 8.031 4.808 4.046 22.824 1.159 18.332 3.805 7.999 4.598 2.607 4.737 1.983 9.941 3.563 11.812 4.833 1.517 3.998 1.489 2.887 3.263 2.639 3.463 7.675 4.355 4.070 5.508 2.992 15.523 22.979 4.210 6.348 12.577 3.763 10.000 2.482 5% 0.665 2.713 5.802 7.233 9% 0.351 19.793 21.899 10.611 4.938 4.678 16.622 17.889 6.424 6.019 5.235 5.661 16% 0.118 11.246 2.884 3.749 5.303 4.024 7.999 2.604 9.799 2.128 6.793 4.802 2.605 2.780 3.494 4.775 4.464 6.725 3.438 2.652 12.800 1.811 6.939 12.484 2.233 6.965 1.129 9.002 6.922 4.295 9.910 3.982 7.324 5.367 7.547 2.247 6.668 5.324 14.139 7.855 1.102 7.535 5.295 3.589 2.990 1.873 7.000 .106 12.037 3.772 5.786 8.925 12.058 3.451 4.422 8.762 7% 0.942 2.687 5.132 5.033 5.877 5.487 4.562 16.659 4.142 6.834 2.462 14.402 3.111 1.769 1.201 8.791 4.836 4.274 11.786 6.273 5.222 5.439 4.023 25.991 3.917 1.962 1.689 2.022 8.355 31.244 8.092 3.433 3.353 5.988 5.258 5.530 9.274 10.499 2.870 1.494 2.253 9.840 6.092 5.951 9.712 10.816 2.730 4.421 5.106 2.316 5.580 5.229 5.174 2.242 6.223 3.876 4.915 11% 0.352 3.328 5.487 7.712 5.230 7.423 4.077 9.158 11.468 5.008 5.039 4.333 3.234 5.492 2.170 3.548 5.840 2.765 15.802 4.818 5.985 3.909 1.706 3.787 10.029 5.812 4.268 3.471 10.469 7.413 19.360 7.990 1.853 9.954 4.059 10.842 6.410 3.729 6.914 3.385 9.362 2.696 4.647 2.999 25% 0.886 2.256 6% 0.999 1.850 2.250 7.824 8.855 3.166 12.843 8.880 18% 0.952 2.283 2.002 6.868 5.469 2.877 1.889 4.750 6.566 6.722 8.190 3.40 Part 1 PLANNING YOUR PERSONAL FINANCES Exhibit 1-D Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 40 50 Present value of $1 received at the end of each period for a given number of time periods (an annuity) 2% 0.283 3.000 2.718 15.372 17.623 5.985 1.331 2.856 2.035 2.578 14.604 6.467 6.857 2.825 2.427 9.366 7.952 1.808 2.472 7.571 3.394 9.311 3.929 6.379 7.020 7.988 5.333 35% 0.823 10.759 6.829 3.835 39.977 1.642 6.244 8.863 9.061 8.417 6.465 4.893 1.848 2.814 2.589 3.361 2.660 5.231 4.635 11.759 2.971 6.452 5.730 4% 0.859 2.859 3.690 2.312 3.999 1.196 3% 0.590 15.177 6.500 2.105 7.380 10.795 6.326 3.605 4.752 2.998 4.168 2.292 14.398 17.582 6.779 2.115 25.849 13.533 4.444 3.537 5.839 7.818 10.440 1.783 13.951 3.536 7.255 12.714 1.226 18.292 19.140 2.901 1.870 4.694 8.639 4.409 13.106 10.101 5.358 8.575 5.329 3.339 4.327 4.673 3.685 4.733 7.628 5.368 11.103 7.496 2.623 6.407 1.935 1.833 2.418 6.938 7.467 5.097 6.424 1% 0.212 4.871 5.194 6.470 12.857 2.829 5.865 14.728 7.837 4.910 5.329 3.198 6.766 5.754 14.654 12.206 5.760 9.756 8.313 8.775 3.372 9.715 2.487 3.833 5.798 3.968 5.161 3.195 5.634 7.436 2.122 9.715 4.745 9.003 7.948 4.025 7.843 4.492 6.917 5.928 3.993 1.913 2.922 1.365 8.042 12% 0.890 4.995 6.055 8.736 2.589 1.974 7.134 13.517 5.246 17% 0.724 5.046 15.605 1.118 5.389 5.302 6.405 5.102 3.385 2.594 11.786 8.801 8% 0.224 1.258 11.887 8.659 13.783 2.076 5.926 1.500 50% 0.995 1.946 5.611 4.902 4.478 2.000 2.329 5.997 1.630 4.033 5.192 4.094 15.373 6.546 4.078 4.668 2.207 6.544 8.453 5.954 10.332 13.166 13.262 20% 0.696 1.828 11.462 6.100 4.500 2.161 7.549 7.950 9.499 7.160 4.883 1.384 8.757 10.288 4.289 1.361 1.498 3.824 3.918 6.650 5.702 7.561 13.