Business and Personal Finance, Student Edition

800 Pages·2007·59.83 MB·English

by  Glencoe McGraw-Hill

interactive student edition
Jack R. Kapoor Les R. Dlabay
Professor of Business and Economics Professor of Business
Business and Services Division Department of Economics and Business
College of DuPage Lake Forest College
Glen Ellyn, Illinois Lake Forest, Illinois
Robert J. Hughes William B. Hoyt
Professor of Business Contributing Editor
Dallas County Community Colleges Wilton High School
Dallas, Texas Wilton, Connecticut
About the Authors
Jack R. Kapoor Les R. Dlabay Robert J. Hughes
Jack R. Kapoor is professor of Les R. Dlabay teaches in the Robert J. Hughes teaches
business and economics in the Department of Economics and business, management, and
Business and Services Division Business at Lake Forest College. fi nance courses at Dallas County
at College of DuPage, where He received his Bachelor of Community Colleges. He
he has taught since 1969. He Science in Accounting from received his Bachelor of Arts in
received his Bachelor of Arts in University of Illinois, his Master Business Administration from
Business Administration and of Business Administration in Southern Nazarene University
Master of Science in International Business Management from and his Master of Business
Business from San Francisco State DePaul University, and his Administration and Doctor of
College. He received his Doctor Doctor of Education in Business Education from the University
of Education from Northern and Economic Education from of North Texas. Dr. Hughes
Illinois University. Dr. Kapoor Northern Illinois University. He is has taught at the high school,
was awarded the Business and a founding member of the Illinois community college, and four-
Services Division’s Outstanding Consumer Education Association. year university levels for 36
Professor Award for l999–2000. years. He received the Excellence
in Teaching Award at Richland
College and has 15 years of
experience teaching personal
fi nance courses.
NOTICE: Information on featured companies, organizations, and their products and
services is included for educational purposes only, and it does not present or imply
endorsement of the Business and Personal Finance program.
Copyright © 2007 by The McGraw-Hill Companies. All rights reserved. Except as permitted under the United States Copyright Act,
no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system,
without prior written permission of the publisher.
Printed in the United States of America.
Send all inquiries to:
Glencoe/McGraw-Hill
21600 Oxnard Street, Suite 500
Woodland Hills, California 91367-4906
ISBN-13: 978-0-07-868712-9 (Student Text)
ISBN-10: 0-07-868712-8 (Student Text)
ISBN-13: 978-0-07-869846-0 (Teacher Annotated Edition)
ISBN-10: 0-07-869846-4 (Teacher Annotated Edition)
2 3 4 5 6 7 8 9 027 09 08 07 06 05
Reviewers
Rosella Bannister Paul Jussila Betty Tobler
Jump$tart Personal Finance South Windsor High School St. Louis Public Schools
Clearinghouse South Windsor, Connecticut St. Louis, Missouri
Ann Arbor, Michigan
Mike Kelly Mark Van Hoy
Janet Barnes Hazelwood East High School Hazelwood West High School
Hazelwood West High School St. Louis, Missouri Hazelwood, Missouri
Hazelwood, Missouri
Jason Lee Patty Wamble
Thelma Brooks Olympia High School Cape Central High School
Educational Consultant Orlando, Florida Cape Girardeau, Missouri
Columbus, Ohio
Diane Manley Elizabeth Watt
Edlena Carmon St. Louis, Missouri North Education Center
Marion Franklin High School Columbus, Ohio
Greg Moore
Columbus, Ohio
Columbus, Ohio Ken Watts
Sharon Clemons Montclair High School
Jeff Noyes
Thomas Worthington High Montclair, New Jersey
Minnetonka High School
School
Minnetonka, Minnesota Polly White
Worthington, Ohio
Wawasee High School
Verta Parks
John E. Clow, Ph.D. Syracuse, Indiana
Marion Franklin High School
State University of New York
Columbus, Ohio Tamara Wickline
Oneonta, New York
Dublin Coffman High School
Kevin Richberg
Joe Cook Dublin, Ohio
Montclair High School
Southeast Career Center
Montclair, New Jersey Susie Wright
Columbus, Ohio
Walnut Ridge High School
Verlin Samples
Diane W. Culpepper Columbus, Ohio
Hamilton Local
Winter Park Tech
Columbus, Ohio Glenn Zipfel
Winter Park, Florida
Christian Brothers High
James C. Scharer
Joy Davis School
Fremont Ross High School
Delaware Area Career Center St. Louis, Missouri
Fremont, Ohio
Delaware, Ohio
Natalie Schaublin
Laneita Dunphy
Westerville North High
Montclair High School
School
Montclair, New Jersey
Westerville, Ohio
Ernestine Gordon
Ken Schnitzer
Montclair High School
Montclair High School
Montclair, New Jersey
Montclair, New Jersey
Georgia Hoover
Julie Smith
Dublin Scioto High School
Southeast Career Center
Dublin, Ohio
Columbus, Ohio
Contents iii
Welcome to Business and Personal Finance
Each day you are surrounded by new choices for shopping, watching television, and other
activities. You also have many choices about how to spend your money. Business and Personal
Finance can help you make the right decisions. You will develop financial literacy through inte-
grated academics, real-world examples, and practical advice. By learning how to make informed
decisions related to spending, saving, borrowing, and investing, you can build a solid foundation
for your financial security now and in the future.
Brief Table of Contents
Unit 1 Planning Personal Finances
Chapter 1 Personal Financial Planning
Chapter 2 Finances and Career Planning
Chapter 3 Money Management Strategy
Chapter 4 Consumer Purchasing and Protection
Unit 2 Banking and Credit
Chapter 5 Banking
Chapter 6 Consumer Credit
Chapter 7 The Finances of Housing
Unit 3 Investing Financial Resources
Chapter 8 Saving and Investing
Chapter 9 Stocks
Chapter 10 Bonds and Mutual Funds
Chapter 11 Real Estate and Other Investments
Unit 4 Protecting Your Finances
Chapter 12 Planning Your Tax Strategy
Chapter 13 Home and Motor Vehicle Insurance
Chapter 14 Health, Disability, and Life Insurance
Chapter 15 Retirement and Estate Planning
Unit 5 Business Ownership and Planning
Chapter 16 Types of Business Ownership
Chapter 17 Developing a Business Plan
Chapter 18 Developing a Financial Plan
Unit 6 Business Finance Basics
Chapter 19 Sources of Funding
Chapter 20 Financial Accounting
Chapter 21 Managing Payroll and Inventory
Chapter 22 Pricing, Costing, and Growth
iv Contents
Table of Contents
To the Student xvi
UNIT 1 Planning Personal Finances 2
WebQuest Internet Project One Life to Plan 2
Finance File Which Adviser Knows the Way? 3
Chapter 1 Personal Financial Planning 4
Section 1.1 Financial Decisions and Goals 6
Section 1.2 Opportunity Costs and Strategies 19
Go Figure Annual Interest 21
Go Figure The Future Value of a Single Deposit 21
Ask Standard & Poor’s 5
Global Financial Landscape India 15
Academic Connection Language Arts 13
Careers in Finance Personal Banker 11
Document Detective Monthly Budget Worksheet 12
Chapter 1 Review and Activities 26
What’s Your Financial ID? Your Spending Profi le 28
Your Financial Portfolio Getting Your Own Wheels 29
Chapter 2 Finances and Career Planning 30
Section 2.1 Planning Your Career 32
Section 2.2 Employment and Career Development 40
Ask Standard & Poor’s 31
Global Financial Landscape Japan 38
Academic Connection Science 34
Careers in Finance Cashier 49
Document Detective IRS Form W-4 42
Chapter 2 Review and Activities 54
What’s Your Financial ID? Find Your Personality Traits 56
Your Financial Portfolio Applying for a Job 57
Contents v
Chapter 3 Money Management Strategy 58
Section 3.1 Organizing Financial Records 60
Section 3.2 Personal Financial Statements 65
Section 3.3 Budgeting for Financial Goals 74
Go Figure Net Worth 68
Go Figure Net Cash Flow 71
Ask Standard & Poor’s 59
G lobal Financial Landscape
South Korea 80
Academic Connection History 75
Careers in Finance Financial Advisor 69
Document Detective Personal Balance Sheet 81
Chapter 3 Review and Activities 84
What’s Your Financial ID? Money Management Quiz 86
Your Financial Portfolio What Is Your Net Worth? 87
Chapter 4 C onsumer Purchasing and
Protection 88
Section 4.1 Consumer Purchasing 90
Section 4.2 Resolving Consumer Complaints 104
Go Figure Unit Pricing 101
Ask Standard & Poor’s 89
G lobal Financial Landscape
Ecuador 106
Academic Connection Language Arts 108
Careers in Finance Retail Sales Associate 109
Document Detective A Warranty 102
Chapter 4 Review and Activities 112
What’s Your Financial ID? Are You a Smart Shopper? 114
Your Financial Portfolio Your Budget 115
UNIT 1 LAB Get a Financial Life!
Setting Up a Career Plan 116
vi Contents
UNIT 2 Banking and Credit 118
WebQuest Internet Project Your Own Home 118
Finance File Consumer Debt 119
Chapter 5 Banking 120
Section 5.1 F inancial Services and Institutions 122
Section 5.2 S avings Plans and Payment
Methods 132
Go Figure Interest Compounded Monthly 136
Go Figure Rate of Return 137
Ask Standard & Poor’s 121
Global Financial Landscape Switzerland 140
Academic Connection History 141
Careers in Finance Bank Teller 124
Document Detective Checking Account Bank
Statement 138
Chapter 5 Review and Activities 148
What’s Your Financial ID? Basic Banking Quiz 150
Y our Financial Portfolio C omparison Shopping
for Banking Services 151
Chapter 6 Consumer Credit 152
Section 6.1 What Is Consumer Credit? 154
Section 6.2 The Costs and Methods of Obtaining Credit 1 62
Section 6.3 Protecting Your Credit 178
Section 6.4 Managing Your Debts 186
Go Figure Debt Payments-to-Income Ratio (DPR) 163
Go Figure Simple Interest on a Loan 166
Ask Standard & Poor’s 153

Global Financial Landscape Israel 164
Academic Connection History 174
Careers in Finance Credit Analyst 167
Document Detective Credit Card Statement 171
Chapter 6 Review and Activities 192
What’s Your Financial ID? Your Credit Profi le 194
Your Financial Portfolio C redit Cards: Getting
the Best Deal 195
Contents vii
Chapter 7 The Finances of Housing 196
Section 7.1 Housing Options 198
Section 7.2 Renting a Residence 202
Section 7.3 Buying and Selling a Home 209
Ask Standard & Poor’s 197
Global Financial Landscape Spain 220
Academic Connection Math 217
Careers in Finance Real Estate Agent 213
Document Detective Calculating a Mortgage Payment 214
Chapter 7 Review and Activities 228
What’s Your Financial ID? W here Would
You Like to Live? 230
Your Financial Portfolio R enting or Buying
Your Home 231
UNIT 2 LAB Get a Financial Life! Home Ownership 232
UNIT 3 I nvesting Financial
Resources 234
WebQuest Internet Project Nest Eg 234
Finance File The Best Homes for
Rollover IRAs 235
Chapter 8 Saving and Investing 236
Section 8.1 P reparing for a Savings or
Investment Program 238
Section 8.2 S avings and Investment
Options 250
Section 8.3 R educing Risk and Sources
of Information 257
Go Figure Infl ation Rates and Investments 245
Go Figure A Bond’s Market Price When Interest
Rates Go Up 246
Go Figure A Bond’s Market Price When Interest
Rates Go Down 247
Ask Standard & Poor’s 237

Global Financial Landscape China 259
viii Contents
Academic Connection Language Arts 246
Careers in Finance Investment Analyst 252
Document Detective Savings Goals Worksheet 253
Chapter 8 Review and Activities 266
What’s Your Financial ID? Are You a Risk Taker? 268
Your Financial Portfolio Avoiding Future Shock 269
Chapter 9 Stocks 270
Section 9.1 Common and Preferred Stocks 272
Section 9.2 Evaluating Stocks 277
Section 9.3 Buying and Selling Stocks 291
Go Figure Current Yield of a Stock Investment 286
Go Figure Total Return 287
Go Figure Earnings Per Share 288
Go Figure Price-Earnings Ratio 288
Ask Standard & Poor’s 271
G lobal Financial Landscape
United Kingdom 279
Academic Connection Economics 292
Careers in Finance Stockbroker 289
Document Detective Stock Confi rmation Report 282
Chapter 9 Review and Activities 300
What’s Your Financial ID? Taking Stock 302
Your Financial Portfolio Investing in Stock 303
Chapter 10 Bonds and Mutual Funds 304
Section 10.1 Corporate and Government Bonds 306
Section 10.2 Investing in Bonds 319
Section 10.3 Mutual Funds 326
Section 10.4 Investing in Mutual Funds 335
Go Figure A Bond’s Annual Interest 307
Go Figure Approximate Market Value of a Bond 312
Go Figure Dollar Amount of Return on a T-Bill 315
Go Figure Rate of Return on a T-Bill 316
Go Figure Current Yield of a Bond Investment 323
Go Figure Net Asset Value 328
Go Figure Capital Gain 340
Go Figure Percentage of Asset Growth Withdrawal 344
Contents ix