Cameron's Dilemma: Finding a New Job

  Cameron Foster, a 55-year-old retail store manager earning $85,000 a year, has worked for the same company during his entire 30-year career. Cameron was recently laid off and is still unemployed 10 months later, and his severance pay and 6 months’ unemployment compensation have run out. Because he has consistently observed careful financial planning practices, he now has sufficient savings and investments to carry him through several more months of unemployment. Cameron is actively seeking work but finds that he is overqualified for available lower-paying jobs and underqualified for higher-paying, more desirable positions. There are no openings for positions equivalent to the manager’s job he lost. He lost his wife several years earlier and is close to his two grown children, who live in the same city. Cameron has these options: ● Wait out the recession until another retail store manager position opens up. ● Move to another area of the country where store manager positions are more plentiful. ● Accept a lower-paying job for two or three years and then go back to school evenings to finish his college degree and qualify for a better position. ● Consider other types of jobs that could benefit from his managerial skills. 1. What important career factors should Cameron consider when evaluating his options? 2. What important personal factors should Cameron consider when deciding among his career options? 3. What recommendations would you give Cameron in light of both the career and personal dimensions of his options noted in Questions 1 and 2? 4. What career strategies should today's workers employ in order to avoid Cameron's dilemma? 2 )Life Cycle of Financial Plans Hudson Ross and Camila Cox are planning to get married in six months. Both are 30 years old have been out of college for several years. Hudson uses three credit cards and has a bank account balance of $7,500 while Camila only uses one credit card and has $9,500 in her bank account. What financial planning advice would you give the couple? 3 )Critical Thinking Case 1 Aaron's Need to Know: Personal Finance or Golf? During the Christmas break of his final year at the University of Florida (U of F), Aaron Barnes plans to put together his résumé in order to seek full-time employment as a software engineer during the spring semester. To help Aaron prepare for the job interview process, his older brother has arranged for him to meet with a friend, Carolyn Jenkins, who has worked as a software engineer since her graduation from U of F two years earlier. Carolyn gives him numerous pointers on résumé preparation, the interview process, and possible job opportunities. After answering Aaron’s many questions, Carolyn asks Aaron to update her on what he’s up to at U of F. As they discuss courses, Carolyn shares that of all the electives she took, the personal financial planning course was most useful. Aaron says that, although he had considered personal financial planning for his last elective, he’s currently leaning toward a beginning golf course. He feels that the course will be fun because some of his friends are taking it. He points out that he doesn’t expect to get rich and already knows how to balance his checkbook. Carolyn tells him that personal financial planning involves much more than balancing a checkbook, and that the course is highly relevant regardless of income level. She strongly believes that the personal financial planning course will benefit Aaron more than beginning golf—a course that she also took while at U of F. 1. Describe to Aaron the goals and rewards of the personal financial planning process. 2. Explain to Aaron what is meant by the term financial planning and why it is important regardless of income. 3. Describe the financial planning environment to Aaron. Explain the role of the consumer and the impact of economic conditions on financial planning. 4. What arguments would you present to convince Aaron that the personal financial planning course would benefit him more than beginning golf? The input in the box below will not be graded, but may be reviewed and considered by your instructor. 4) Using overdraft protection line Kaylee Holmes has an overdraft protection line. Assume that her October 2021 statement showed a latest (new) balance of $326. If the line had a minimum monthly payment requirement of 7 percent of the latest balance, then what would be the minimum amount that she'd have to pay on her overdraft protection line? Round your answer to the nearest $5 figure.   5 )Calculating credit card interest Joseph Simpson, a student at State College, has an average balance of $240 on his retail charge card; if the store levies a finance charge of 20 percent per year, how much monthly interest will be added to his account? Assume that the balance is computed by the average daily balance method. Round the answer to 2 decimal places. 6)Home equity line interest Isaiah and Allison Burton have a home with an appraised value of $150,000 and a mortgage balance of only $75,000. Given that an S&L is willing to lend money at a loan-to-value ratio of 70 percent, how big of a home equity credit line can Isaiah and Allison obtain? How much, if any, of this line would qualify as tax-deductible interest if their house originally cost $100,000? 7)Choosing between credit cards Justin Nichols recently graduated from college and is evaluating two credit cards. Card A has an annual fee of $75 and an interest rate of 9 percent. Card B has no annual fee and an interest rate of 16 percent. Assuming that Justin intends to carry no balance and to pay off his charges in full each month, which card represents the better deal? If Justin expected to carry a significant balance from one month to the next, which card would be better? Explain. 8 ) Conventional vs. ARM mortgage payments What would the monthly payments be on a $80,000 loan if the mortgage were set up as: ● A 15-year, 5.5 percent fixed-rate loan. Round the answer to the nearest cent. ● A 30-year ARM in which the lender adds a margin of 2.5 to the index rate, which now stands at 3.0 percent. Find the monthly mortgage payments for the first year only. Round the answer to the nearest cent. 9)Calculating monthly mortgage payments Find the monthly mortgage payments on the following mortgage loans using either your calculator or the Excel spreadsheet. a)$150,000 at 5.5 percent for 25 years. Do not round intermediate calculations. Round the answer to the nearest cent. b)$105,000 at 5.5 percent for 20 years. Do not round intermediate calculations. Round the answer to the nearest cent. c)$95,000 at 5 percent for 15 years. Do not round intermediate calculations. Round the answer to the nearest cent. 10) Calculating required down payment on home purchase How much would you have to put down on a house costing $90,000 if the house had an appraised value of $80,000 and the lender required an 80% loan-to-value ratio? Ignore any closing costs. 11) Determining maximum affordable mortgage payment Using the maximum ratios for a conventional mortgage, how big a monthly payment could the Sanchez family afford if their gross (before-tax) monthly income amounted to $5,500? (Hint: Monthly mortgage payments cannot exceed 25 to 30 percent of the borrower's monthly gross income and the borrower's total monthly installment loan payments (including the mortgage payment) cannot exceed 33 percent to 38 percent of monthly gross income.) Would it make any difference if they were already making monthly installment loan payments totaling $750 on two car loans? Maximum mortgage payment they could make would be $ 12) Calculating the net costs of checking accounts Determine the annual net cost of these checking accounts. A "-" sign must precede any negative net cost answers. Round your intermediate calculations to two decimal places. ● Monthly fee $7, check-processing fee of 25 cents, average of 26 checks written per month. Round the answer to the nearest cent. ● Annual interest of 3.5 percent paid if balance exceeds $500, $5 monthly fee if account falls below minimum balance, average monthly balance $600, account falls below $500 during 7 months. Round the answer to the nearest cent. 13) Calculating interest earned and future value of savings account If you put $1,000 in a savings account that pays interest at the rate of 5 percent, compounded annually, how much will you have in 7 years? Round the answer to the nearest cent. Round FV-factor to three decimal places or use the Appendix A . (Hint: Use the future value formula.) How much interest will you earn during the 7 years? Round the answer to the nearest cent. If you put $1,000 at the end of each year into a savings account that pays interest at the rate of 5 percent a year, how much would you have after 7 years? Use the Appendix B . Round the answer to the nearest cent. Round FV-factor to three decimal places. Exposure from stolen ATM card 14) Suppose that someone stole your ATM card and withdrew $1,300 from your checking account. How much money could you lose according to federal legislation if you reported the stolen card to the bank: the day the card was stolen? 7 days after the theft? 66 days after receiving your periodic statement? 15) Evaluating homeowner's policy coverage Last year, Eleanor and Felix Knight bought a home with a dwelling replacement value of $340,000 and insured it (via an HO-5 policy) for $279,000. The policy reimburses for actual cash value and has a $500 deductible, standard limits for coverage C items, and no scheduled property. Recently, burglars broke into the house and stole a 2-year-old television set with a current replacement value of $500 and an estimated useful life of 9 years. They also took jewelry valued at $1,550 and silver flatware valued at $3,600. a) Assuming a 50% coverage C limit, calculate how much the Knights would receive if they filed a claim for the stolen items. Do not round intermediate calculations. Round the answer to the nearest cent. b) What advice would you give the Knights about their homeowner's coverage? 16 ) Personal automobile policy coverage Finn Stone has a PAP with coverage of $25,000/$50,000 for bodily injury liability, $25,000 for property damage liability, $3,000 for medical payments, and a $500 deductible for collision insurance. How much will his insurance cover in each of the following situations? Will he have any out-of-pocket costs? Round the answers to the whole dollar, if necessary. Leave no cells blank, be sure to enter "0" wherever required. A )Finn loses control and skids on ice, running into a parked car and causing $3,595 damage to the unoccupied vehicle and $3,400 damage to his own car. Total paid by the insurance company: $ Finn's out-of-pocket costs: B) Finn runs a stop sign and causes a serious auto accident, badly injuring two people. The injured parties win lawsuits against him for $49,000 each. Total paid by the insurance company: $ Finn's out-of-pocket costs (for both victims): C ) Finn's 18-year-old son borrows his car. He backs into a telephone pole and causes $1,300 damage to the car. Total paid by the insurance company: Finn's out-of-pocket costs: 17) Payout on homeowner's insurance policy Ivy Gordon's home in Charleston was recently gutted in a fire. Her living and dining rooms were destroyed completely, and the damaged personal property had a replacement price of $22,000. The average age of the damaged personal property was 3 years, and its useful life was estimated to be 16 years. What is the maximum amount the insurance company would pay Ivy, assuming that it reimburses losses on an actual cash-value basis and has a $500 deductible? Assume that the total coverage requirement is met. Do not round intermediate calculations. Round the answer to the nearest cent. 18 ) Need for renter's insurance Jane and Leo Daniels, both graduate students, moved into an apartment near the university. Jane wants to buy renter's insurance, but Leo thinks that they don't need it because their furniture isn't worth much. Jane points out that, among other things, they have some expensive computer and stereo equipment. To help the Daniels resolve their dilemma, suggest a plan for deciding how much insurance to buy and give them some ideas for finding a policy.