FINC 209 PERSONAL FINANCE CASE STUDYOverviewThis case study requ

FINC 209 PERSONAL FINANCE CASE STUDYOverview
This case study requires you to apply the concepts learned in
FINC 209 Personal Finance course. The course has equipped
you with basic personal finance skills. For this project, you
must analyze the given information in the case, gather relevant
information from various primary and secondary sources (In
some cases other than the textbook) and use your acquired skills
in making optimal decisions.Goals
Help Michael and Mary Gordon achieve their personal and
financial goals by helping them with their objectives in credit
management, home purchase, insurance analysis, retirement
planning and investment planning.Deliverables
A report with answers to the questions. Maximum 5-6 pages. I
am not looking for prose!
DUE DATE: May 17th, 2020; 11.59PM
Guidelines
1. Keep the answers concisebut address all questions
thoroughly. Show your calculationsfor the questions with
numbers.
2. Facts must be correct, and opinions must be well supported.
3. Please list the source of your information where relevant.
4. Creativity in solving problems in the case will be given extra
points. However, solutions must adhere to facts ie fabrication
will hurt your score.
(
Page
3

of
7
) (
FINC 209 Personal
Finance
Case Study
)
Michael and Mary Gordon Family
Michael and Mary Gordon are developing a financial plan to
accomplish their goals and objectives. They have great
aspirations for the future, however, are concerned about their
current financial situation.
Assume today’s date is January 1, 2019
Personal Background and Information
Michael Gordon (Age 32): Michael is a Vice President of
business development at Cornerstone, LLC, a company that
helps firms with their digital presence. He has been employed
there since its founding, 8 years ago. The company faces heavy
competition and its profitability has been erratic. His job
however, is fairly secure. His annual salary is $85,000. He is
entitled to a performance bonus of 20-30% of his salary. Owing
to industry conditions and poor company profitability, no bonus
was paid for the last two years. He is in good health with no
history of illness and has never smoked.
Mary Gordon (Age 30): Up until Sam was born, Mary was a web
designer at a digital design company. She is uncertain when she
will return to work. She is in good health with no history of
illness and has never smoked.
The Gordons: Michael and Mary have been married for 7 years.
They have two children, Max and Sam. Michael’s mother, Carol
lives with the Gordons. They have a no criminal record and
have a clean financial history.Family

· Max is 6 years old and is in 1st grade. He goes to a public
school near where the Gordons live. He has shown a strong
interest in music and his parents are considering enrolling him
for music lessons.
· Sam is 4 years old. She attends pre-school.
· Carol, 68 years, is Michael’s mother. She had a heart attack
two years ago and has been living with the Gordons since she
left the hospital. She is retired and uses income from her
investments and social security income to meet her living
expenses. She did not qualify as a dependent of the Gordons
(For Tax purposes) in 2018. She is concerned that her
investments may not perform well in the future and Michael and
Mary may have to provide financial support.
· John and Jessica Paulson are Mary’s parents. They are in good
health and have offered to help pay for Max and Sam’s tuition
through the eighth grade, if required. They are retired,
financially secure and travel often. Mary is their only
child.Other Financial Details
· Michael and Mary have FICO Scores of 710 each.
· They expect their investment portfolio to earn 8% over the
long term
· They file their taxes ‘Married Filing Jointly’. They take the
standard deduction and have child tax credit for each of their
two children.
· Michael has a 401 (K) plan at work. His company matches his
contributions up to 3% of his salary.
STATEMENT OF CASH FLOW (2019 Expected)

Michael's Salary
$85,000
Investment Income
Interest
$500
Other Income
$600
Total Investment Income
$1,100

TOTAL INCOME
$86,100
1
Pre Tax Contributions
401(K) Contributions
$4,800
Health insurance premiums
$1,200
TOTAL PRE-TAX REDUCTIONS
$6,000

2
Taxes*
Federal
$7,025
State
$1,250
TOTAL TAXES
$8,275
3

Living Expenses
Rent
24000
Food & Outside Meals
12500
Clothing
4500
Child Care
2500
Entertainment & Travel
7650

Utilities & Phone
3600
Auto Maintenance
1500
Church Contributions
500
TOTAL LIVING EXPENSES
56750
4
TUITION & EDUCATION
12500

5
Other payments
Car Payment
3400
Car Insurance
1000
Credit Card Payment
600
Student Loan Payment
2400

7400
6
TOTAL OUTFLOW
$90,925
2+3+4+5+6
(7)
NET CASH FLOW
($4,825)
1-7

*Michael takes the standard deduction, and child tax credit for
his two children
STATEMENT OF FINANCIAL POSITION (Jan 1, 2019)
ASSETS
Joint Checking account
$1,500
Joint Savings account
$1,000
TOTAL LIQUID ASSETS
$2,500
Section 401 (K) Vested Plan*
$43,000
Certificates of deposits (CDs)**
$25,000
TOTAL INVESTMENTS
$68,000
Automobile
$15,000
Jewelry

$13,500
Furniture/Household
$60,000
OTHER PERSONAL ASSETS
$88,500
TOTAL ASSETS
$159,000
LIABILITIES & NET WORTH
Credit Cards***
$5,000
Car Loan
$9,000
Stident Loan
$35,000
TOTAL LIABILITIES
$49,000
GORDON FAMILY NETWORTH
$110,000
TOTAL LIABILITIES & NET WORTH
$159,000
* Michael’s 401 (K) is 100% invested in the stock of his

company, Cornerstone, LLC.
**CDs are earning 2% per year and will mature in 6 months.
They will lose interest earned if they redeem early
***Credit Card 1: APR: 28%. Credit Limit $3000. Balance
Outstanding: $1000. Credit Card 2: APR 22%. Credit Limit
$4000: Balance Outstandi ng: $4000
OBJECTIVES AND QUESTIONS
I. Credit
a) Calculate the following ratios andstate (Yes or No) if they
are within prescribed limits usingExhibit 2-6and Exhibit 7-6in
your book and : 1) Housing costs as a % of gross income 2)
Total Debt service as a % of gross income 3) Food as a % of
after tax income 4) Entertainment as a % of after tax income 5)
Clothing as a % of after tax income
b) Suggest expenditures they can reduce and by how much so
that their cash flow statement has a surplus.
c) What is their credit utilization ratio on their credit card? Is it
hurting or helping their credit score? Suggest 2 things they can
they do to improve their credit score (Hint: Please see all the
factors that affect FICO score from the textbook- Page 156,
Chapter 5 )
II. Home Purchase
a) The Gordon’s are considering buying a house in New Jersey.
Analyze their current financial situation and discuss what is the
maximum amount of monthly mortgage payment they can
afford. Based on your answer, what is the maximum value
(Approximate) of the property they should consider? Assume
that the monthly cost of property taxes and insurance is $300.
Assume they take a 30 year loan which costs 3.5%. (See the
example in your book in Chapter 7. Exhibit 7- 6 AND/OR my
video on this topic)
b) The Gordon’s decide to finance their home purchase through
a 30-year fixed rate mortgage because the monthly payment will

be lower and they will not have any uncertainty because interest
rate will be fixed. What interest rate can they expect on this
mortgage? Use one of the website below or any publicly
available source to answer this question.
c) How much down payment would you suggest they make?
Offer them suggestions on how to come up with the down
payment, based on the facts of the case or other resources they
may have.
d) List 3 closing costs they can expect to pay for the home
purchase. (Hint: It is in Chapter 7.) Suggested sources of
information
LendingTree: https://www.lendingtree.com/
Zillow.com: https://www.zillow.com/
III. Insurance
a) Do you think Michael should purchase life insurance? Why?
Be brief!
b) Calculate how much life insurance you suggest Michael
should buy. (Use one of the methods listed in Chapter 10.)
Whose life should be insured and who should be the
beneficiary?
c) Pick a term lifeinsurance (Number of years and any one
insurance company such as Geico, Met Life, State Farm, etc).
What would be the monthly premium for this insurance? Use
one of the website below to find what premium they can expect
to pay. Would you recommend that they buy Whole life
Insurance instead of Term life Insurance? Explain your answer.
d) Michael has the Omnia Bronze medical insurance offered by
Horizon Blue Cross Blue Shield of New Jersey. Click here for
explanation of benefits.(This document is also available in
FILES on Canvas) Based on the explanation of benefits help
Michael and Mary understand the following situations.

1) What would be the cost of an annual routine physical?
2) Max fractured his wrist and had to be taken to the Emergency
room. If the total bill for treatment was $1500, how much would
Michael have to pay from his pocket. Assume there were no
other medical bills for the year.
3) For this question, assume this year the family has already
incurred medical expense of $14,300 (Not including premiums
and penalties). They incur $1500 for a visit to a doctor’s office
visit. The doctor was listed as a Tier 2 provider. How much will
the insurance cover?
Suggested sources of information for this topic (You are not
limited to these sources)
GEICO get a quote: https://www.geico.com/life-insurance/
State Farm get a quote:
https://www.statefarm.com/insurance/quotes/life-quote
MetLife get a quote: https://www.metlife.com/insurance/life-
insurance/rapid-term-life-insurance/#
IV. Retirement
a) Michael’s company is expected to announce a policy, that in
the future, it will match 50% of the contributions up to 8% of
the salary. How much should Michael contribute to his
retirement account to take full advantage of this policy and
would you recommend that he do so?
b) Assume the Gordon’s average tax rate is 25% currently and
for the future until retirement but is expected to be 15% after he
retires. If Michael contributes $1000 into his IRA today, how
much in taxes will he save. If this contribution grows to
$10,000 after he retires, and he withdraws it all at once, how
much in taxes will he have to pay?
c) What is Michael’s 401 (K) invested in (It is in the case, read
it!)? Is it appropriately invested? State your reason.

d) If Michael left his current job to start a new job, what can he
do with his current 401 (K)? List any two good choices he has.
V. Investments
a) Michael is analyzing a few mutual funds to add to his 401(K)
portfolio. He would like your help in choosing one from the
following funds:
· 1) Parnassus Core Equity Investor (Ticker: PRBLX) or 2)
Oakmark Fund (Ticker: OAKMX)
· Using the websites given below, answer the following question
for each fund
· 1) Names of the portfolio manager(s) 2) Last 5 year and 10
year performance for each fund compared to the S&P 500
(Benchmark) ) 3) Expense ratio for each fund 4)
Minimum investments needed 5) Morningstar rating for each
fund
b) Michael asks you, “Both the above mutual funds have fees,
which I think are quite high. Are there any options for investing
in US stocks if I want to avoid paying high fees?” Choose ONE
low cost alternative to the above funds to invest in US stocks.
State the name and the ticker of the low cost alternative.
(
Suggested
sources
of
information
(You
are

not
limited
to
these
sources)
Parnassus
Investments:
https://www.parnassus.com/
Oakmark
Funds:
http://www.oakmark.com/oakmark.htm
Morningstar:
www.morningstar.com
VI.
Financial Statements
How
would
the
Gordon’s
balance
sheet

change
if
they
purchase
a
home
and
finance
it
with
a
mortgage as per your recommendation?
How
will
the
Gordon’s
net
worth
change

if
they
do
the
following
1)
Save
$5,000
from
their paycheck
2)
Payoff
a
loan
of
$4,000
3)
Purchase

a
car
for
$25,000
and
finance
it
entirely
with
a car
loan.
Hints:
Assets-Liability = Net
worth
A
surplus
from
your
cash
flow,

if
it
is
saved,
goes
into
assets
such
as
bank
account
or
investment account.
)
7

Literature Review Draft
RCH 202
Training to lose weight and have better health
Introduction
Problem statement
Most of the people are unable to are not disciplined enough to
maintain a good weight due to the lifestyles and eating habits.
Training helps reduce weight reduction weight can help
someone escape some diseases and other conditions that are
related to overweight. There is, however, a concern in the way
someone should train since some people can harm themselves.
On the other hand, some might do the wrong thing and take
them long before they realize their goal. As such the literature
review presented here will help navigate some of the issues
related to training for a better healthy weight loss.
Research questions
· Can one train without exposing himself to risks?
· Which is the best exercise to train for weight loss?
Hypothesis
Any training can lead to weight loss regardless of the exercise
that one is engaged in.

Literature review
Safe training
Training is one of the many ways to keep the body healthy;
there are those people whose lives are based on training for
example coaches and athletes. There are many ways one can
train (Kaplan, 2014) says that one can train via a treadmil l,
jogging, as well as walking. Where a person is doing it by
himself or herself without a professional around the person
could up doing some exercises that could harm his body and
cause injuries. The persons who are trained by the professionals
have an advantage over the people who are not trained by
professionals. The professionals are precise in the kinds of
training geared towards a certain goal. Most people do not know
how to reach these goals as much as they are eager to train and
get there. (Kaplan, 2014) emphasizes the need to ensure that
one does not complicate the training process and develop health
issues. (Brunt, 2016) explains how and why sportsmen tend to
have muscle pulls and how they come about, as such when one
is training alone he/she should consider doing activities that
may not trigger such conditions since the person can find more
complications regarding the same. He goes on to explain the
role of the mind in the lifting of weight and how the brain
connects to the muscles to ensure that there coordination.
More people end up hurting themselves since they are
focusing more on the outcomes than the exercise at hand.
(Brunt, 2016) warns against this and tells that training should
focus on the exercise since this will help him/her have a focus
and the muscles will coordinate with the brain. Further such
kind of training will not put the trainee under pressure to reach
some goals that he/she cannot make realistically.
Training is not risky when done in the right way,
(Kinderman, 2016) shows how training would help protect other
inner organs if the training is done in the right way. (Meyers,
2017) Trainees also develop a sense of confidence as they meet
other people; there is a reduced risk of injuries such as broken

arms or legs in the course of the day-to-day activities. Training
helps also to ensure that the person is physically fit to run the
day-to-day errands that he/she has. Training helps one to
develop healthy and stronger muscles as time goes by. A person
who trains also enjoys the benefits of self-management where
the person can carry him/herself and do everything by
himself/herself. And for the ultimate reason of most people
weight loses is also a part of the package for training. A trainee
loses his/her weight according to the type of training adopted,
intense, duration et cetera. Those factors should be well
balanced to ensure that a trainee does not harm him/herself and
end up receiving the best from the training.
One should ensure to practice safe training to ensure
that injury does not occur, seeking the help of medics or the
professionals in the training profession to help an individual
meet his/her goals while training and avoid injuries that could
occur.
Training for weight loss
There are different ways in which people use to reduce their
weight; disciplines in the diets and the frequency of eating
certain foods, and training. Both of them are natural ways since
no chemicals are used just control measures to ensure nobody's
weight is added but in fact, calories are burnt out. Several
pieces of training would lead someone to the realization of the
goal weight loss goal. For example, there is running and jogging
one of the most common ways and safest ways of training. It
has been unclear whether jogging or running would yield better
results in the quest for weight loss. Since people would like to
run not many can do that exercise. In other words based on the
different mobility strengths that people have there is a chance
that one will find a person who can walk but not jog, jog but
cannot run.
Running is attributed to high respiratory functions where
one breathes heavily to supply the needed oxygen to the body.
The trainee sweets a lot while running indicating that there is a

high level of body metabolism involved, the sweating allows to
cool off the body. Sweeting does not cause a significant loss of
weight in the body yet trainees are advised to drink more water
when training to ensure that the system works well. Although
sweating burns some calories it does not burn enough amounts
to be considered as a way of losing weight. Running helps in
increasing the respiratory rates, this helps in ensuring that all
the food is burnt to provide more energy to the person as well as
to burn calories in the body. The body as a system uses the
resources available to ensure that it cools itself when one is
doing such kind of activity. Although running is seen as one of
the most effective ways (Pickering, 1979) one cannot run for
long distances that explains the reason why the races with the
most speed are gone for lesser miles than the races for longer
miles. This is because when one is running the energy is drained
faster and thus the person has shorter times to rebuild the
energy loss and as such requires more time to rest and have the
energy regained.
Jogging is one of the most preferred ways of training
since most people can manage it. Jogging does not require too
much energy for one to conduct. On the other hand, jogging
allows one to rebuild the list energy as the rate of energy loss is
relatively low. For those trainees who had not been into
training, they are taken slow into the assumption of the jogging
processes. (Pickering, 1979) Jogging offers a person, safety
than running due to the low speed. Jogging has been seen as
one of the most effective training since a trainee can jog for
longer than a person who had opted for running instead. In a
case that was conducted it was revealed that (Kaplan, 2014)
joggers lost more weight than runners, this was backed up by
the fact that running does not cause great loss in weight. As
such it can be seen that there is more explicit weight loss when
a person jogs than when the person runs; more fats are burnt
when one is jogging than when one is running.
Jogging has been so far concluded as one of the best
ways in which one could lose weight. Jogging is less tiresome

and one can do the exercise for long since, it does don’t draw
energy from a person at a higher rate.
References
Avila, P., & Hovell, M. F. (1994). Physical activity training for
weight loss in Latinas: a controlled trial. International journal
of obesity and related metabolic disorders: journal of the
International Association for the Study of Obesity, 18(7),
476-482.
Brunt, E. M. (2016). Nonalcoholic fatty liver disease: pros and
cons of histologic systems of evaluation.International journal
of molecular sciences, 17(1), 97.
How Much Running for Weight Loss? Beginners Advice on the
Best Running Routine for Fitness &Weight Loss. (n.d.).
Retrieved fromhttp://angryjogger.com/category/running-
for-weight-loss
Kaplan, Y., Barak, Y., Palmonovich, E., Nyska, M., &
Witvrouw, E. (2014). Referent body weight values in over
ground walking, over ground jogging, treadmill jogging, and
elliptical exercise. Gait & posture, 39(1), 558-562.
Kindermann, W., & Scharhag, J. (2016). High-Level Endurance
Exercise: Are All Potential'Cons' Justified?. Sports
Medicine, 46(8), 1191.
Mundbjerg, L. H., Stolberg, C. R., Cecere, S., Bladbjerg, E. M.,
Funch‐ Jensen, P., Gram, B., & Juhl, C. B. (2018).
Supervised physical training improves weight loss after
roux‐ en‐ Y gastric bypass surgery: a randomized controlled
trial. Obesity, 26(5), 828-837.
Myers, A. M., Beam, N. W., & Fakhoury, J. D. (2017).

Resistance training for children and adolescents.
Translational pediatrics, 6(3), 137.
Pickering, T. G. (1979). Jogging, marathon running and the
heart. The American journal of medicine, 66(5),
717-719.
Rectal temperatures, weight losses, and sweat rates in marathon
running. | Journal of Applied Physiology. (n.d.). Retrieved
from
https://journals.physiology.org/doi/pdf/10.1152/jappl.1967.
23.3.347

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