| | Name: | | | | | | | Date: | 3/12/13 |
| | Name: |
| Gary Grandview—A Continuing Case - Part 2 |
| | Managing Your Liquidity |
| a. | This is a continuing case (Parts 1 - 6) Read the attached file on Gary, take into |
| | consideration all of the facts and provide analytical answers. Assume the role |
| | of Gary's financial advisor. Facts provided in Part 1 should be considered while |
| | analyzing Parts 2-6. |
| b. | Please make sure that WRAP TEXT and MERGE and Alignment CENTER are ON. |
| | (*Excel Toolbar, Home Tab, Alignment section) |
| c. | To ensure your answers can be seen in the yellow highlighted text box: |
| | A) Increase the height of the text box. (Drag the bottom line of the row number ) |
| | B) Insert line (Right click on line, click insert, click row) |
| d. | Ensure printed copies are readable. Spacing has been adjusted to match |
| | Portrait Printer Perimeters. |
| e. | Save this file, then upload the document into your drop box. | | | | | | | | | |
| | Case Questions | | | | | | | Value of Points |
| | | | | | | | | Possible | Deducted |
| 1 | Calculate the amount of interest that Gary's Savings Account earns per year at 3% | | | | | | | |
| | and compare it to what he is paying in interest on his credit card debt. | | | | | | | |
| | Advise Gary what the comparison reveals and give him your professional | | | | | | | |
| | advice on how he should proceed in the future. |
| | | | | | | | | 2 |
| |
| 2 | Advise Gary on which type of institution he should maintain his |
| | checking, savings, and retirement accounts. |
| a) | Checking account. |
| | | | | | | | | 2 |
| | | | | | | | | |
| b) | Savings account. |
| | | | | | | | | 2 |
| c) | Retirement accounts. |
| | | | | | | | | 2 |
| 3 | Gary is trying to decide if he should keep or sell his stocks and bonds. |
| | | | | | | |
| a) | If Gary's stock doubles in value over the next five years, what |
| | return (in %) would he realize? (Hint: Use the future value table.) |
| | | | | | | | | 2 |
| | | | | | | | | |
|
| |
| b) | Based on his projected annualized return, would it be advisable | | | | | | | 2 |
| | to sell the stocks to pay off his credit card? | | | | | | | | |
| | | |
| | |
| c) | What should Gary do with the Bonds? |
| | | | | | | | | 1 |
| 4 | Gary is considering shopping for a new credit card with a better interest rate. Advise Gary on the pros and cons of opening a new credit card would have on his credit rating. |
| | | | | |
| | | | | | | | | 2 |
| 5 | Gary is reluctant to pay off his credit card debt. He feels that he is young and debt is not a real issue at this time. How would you address Gary's reluctance to pay off his credit card balance? |
| | | | | | Current | | Investment of |
| | | | | | Credit Card Payment | | Credit Card Payments |
| | Future Value of a Lump Sum |
| | Yearly Savings | | | | $2,880 | | $2,880 | |
| | Number of Periods | | | | 5 | | 5 |
| | Interest Rate per Period | | | | 22% | | 6% | |
| | Future Value | | | | $22,290.00 | | $16,234.83 |
| | Compare and contrast the value of five years worth of credit card payments with the value of earnings of an investment of the same amount. ($240.00 credit card payment X 12 months = $2,880.00) |
| | | | | | | | | 2 |
| 6 | Would your advice change if Gary were still single, and would that change |
| | if he were married with 2 children? |
| | a. 45 years old? | | | | | | | 1 | |
| | |
| | b. 60 years old? | | | | | | | 1 |
| | |
| 7 | In talking to Gary you mentioned the increasing threat of identify theft. |
| | Comment on each of the items below and make recommendations |
| | for appropriate changes that will reduce his risk of exposure to identity theft. |
| a) | For convenience, Gary has his driver’s license number printed on | | | | | | | | | | |
| | his checks. He also uses checks to make virtually all payments, |
| | including transactions with local merchants. Gary has a debit card, |
| | but seldom uses it. |
| | | | | | | | | 1 |
| b) | Gary drives past the Post Office to and from work each day, he |
| | maintains a Post Office box and mails all letters and payments at |
| | the Post Office. |
| | | | | | | | | 1 |
| c) | Gary has several credit cards in his wallet, but uses only one regularly. |
| | He also carries his Social Security card, as he can never remember |
| | the number. |
| | | | | | | | | 1 |
| | Gary recycles, including old invoices, credit card statements, and |
| d) | bank statements after retaining them for the appropriate legal time |
| | period. |
| | | | | | | | | 1 |
| e) | Gary uses his cell phone for virtually all his telephone calls, including |
| | ordering merchandise and paying by credit card. |
| | | | | | | | | 1 |
| | | | | | | | | | |
| 8 | Prepare a written report for Gary. Include in your recommendations |
| | the importance of managing liquidity and maintaining a good budget. |
| | | | | | | | | 1 |
| | | | | | | | Total | 25 | |
| | | | | | | | Final Score | | |
lila_v
finance6.xlsx
