# Financial Planning Problems

Financial Planning Problems

Chapter 1

1. Jennifer brings home \$1,600 per month after taxes. Jennifer’s rent is \$350 per month, her utilities are \$100 per month, and her car payment is \$250 per month. If Jennifer’s groceries cost \$50 per week and she estimates her other expenses to be \$150 per month, how much will she have left each month to put toward savings to reach her financial goals?
2. Jennifer (see problem 1) is considering trading in her car for a new one. Her new car payment will be \$325 per month, and her insurance will increase by \$45 per month. Jennifer determines that her other car expenses (gas, oil, etc.) will stay the same. What is the opportunity cost of Jennifer purchasing the new car?
3. Joshua has \$3,000 in assets, an outstanding car loan of \$500, an outstanding student loan of \$2,800. Joshua has monthly cash inflow of \$2,000 and monthly cash outflow of \$1,750. What is Joshua’s net worth?
4. At the beginning of the year Jocolyn had a net worth of \$5,000. Through the year Jocolyn has saved \$100 a month and borrowed \$500 from her parents that must be paid back by in January of next year. On December 31, what is Jocolyn’s net worth?
5. Jacalyn has just received \$1,500 as a gift. How would Jacalyn’s net income be affected is she:
6. Purchased a new stereo.
7. Invested the money.
8. Based on questions 5 above, what would be the affect in one year if she earned 10% on the investment and the stereo depreciated by 10%?
9. Purchase of the stereo
10. Investment of the money.
11. Joan Jett of Salt Lake City, Utah has just graduated and is getting ready to enter the job market at an annual salary of \$24,000. Assuming the average inflation rate of 5 percent and an equal cost-of-living raise, what will Ann’s salary be in 10 years?
12. From problem #7, what will Joan’s salary be in 20 years?
13. Bob Ivie has been a retail salesclerk for six years. At age 35, he is divorced with one child, Bev, age 7. Bob’s salary is \$36,000 per year. He regularly receives \$250 per month child support from Bev’s mother. Bob invests \$100 each month (\$50 in mutual funds and \$50 in U.S. Savings bonds). Using the following information, construct a balance sheet and an income and expense statement for Bob for December 31, 2004 (assuming the numbers below are as of December 31, 2004)
14. Construct a balance sheet and an income and expense statement for Bob (based on the information from problem 9) for December 31, 2005.

ASSETS / Amount
Vested Pension Plan / \$3,000
Money market account / 5,000
Mutual fund / 4,000
Checking account / 1,000
Personal property / 5,000
Automobile / 3,000
U.S. Savings bonds / 3,000
LIABILITIES / Outstanding
Balance
Dental bill (pays \$25 per month) / \$450
Visa (pays \$100 per month) / 1,500
Student loan (pays \$100 per month) / 7,500
ANNUAL EXPENSES(pays monthly) / Amount
Auto insurance / \$780
Rent / 9,096
Utilities / 1,200
Phone / 684