How does the health of the economy affect your financial health? How healthy is the U.S. economy right now? On what measures do you base your judgments? How will your appreciation of the big picture help you in planning for your future?
Chapter 2: 2.1 #4 (p. 38)
You need a jacket, boots, and gloves, but the jacket you want will use up all the money you have available for outerwear. What is your opportunity cost if you buy the jacket? What is your sunk cost if you buy the jacket? How could you modify your consumption to reduce opportunity cost? If you buy the jacket but find that you need the boots and gloves, how could you modify your budget to compensate for your sunk cost?
Chapter 3: 3.2 #2 (p. 76)
Calculate your debt-to-income ratio and other ratios using the financial tools at Biztech (http://www.usnews.com/usnews/biztech/tools/modebtratio.htm). According to the calculation, are you carrying a healthy debt load? Why, or why not? If not, what can you do to improve your situation?
Chapter 7: 7.2 #2 (p. 168)
You have $10,000 to deposit. You want to save it, earning interest by loaning its use in the money market to your bank. You anticipate you will need to replace your washing machine within the year, however, so you don’t want to surrender all your liquidity all at once. What is the best way to save your money that will give you the greatest increase in wealth without too much risk and while still retaining some liquidity? Explain your reasons for your choice of a solution.
Chapter 8: 8.2 #3 (p. 205)
For a car you would like to drive, calculate and compare what it would cost you to buy it and to lease it. Use the Lease versus Buy Calculator athttp://www.leaseguide.com/leasevsbuy.htm. What would be the advantages of owning the car? What would be the advantages of leasing it? For your lifestyle, needs, and uses of a vehicle, should you buy or lease?
Chapter 9: 9.2 #1 (p. 225) a., b., and c. (for c., only answer the adjustable rate mortgage part)
You are considering purchasing an existing single family house for $200,000 with a 20 percent down payment and a thirty-year fixed-rate mortgage at 5.5 percent.
a. What would be your monthly mortgage payment?
b. If you decided to buy two points for a rate of 5 percent, how much would you save in monthly payments? Would it be worth it to buy the points? Why, or why not?
c. When should you consider an adjustable-rate mortgage?
Sample Solution
