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FOUR TH C AN ADI AN EDITION
PERSONAL FINANCE
PERSONAL FINANCE
JEFF MADURA • HARDEEP SINGH GILL
JEFF MADURA • HARDEEP SINGH GILL
www.pearson.com
ISBN 978-0-13-472471-3
madura_9780134724713cvr_printer.indd 1 2017-12-05 3:23 PM

Contents vii
Expenses.......................................................................... 58 Capital Gains and Losses................................................... 93

Creating a Personal Cash Flow Statement.......................... 58
Step 2: Subtract Deductions................................ 93
Factors That Affect Cash Flows............................ 60 Deductions....................................................................... 94
Factors Affecting Income................................................... 60 Net Income....................................................................... 94
Factors Affecting Expenses................................................ 61
Step 3: Calculate Taxable Income........................ 95
Creating a Budget............................................... 62
Step 4: Calculate Net Federal Tax Payable............ 95
Anticipating Cash Shortages.............................................. 63
Assessing the Accuracy of the Budget............................... 63 Tax Credits......................................................... 96
Forecasting Net Cash Flows over Several Months............... 64 Transferable Tax Credits.................................................... 98
Budgeting with a Biweekly Pay Period............................... 65 Tax Credits Eligible for Carry Forward................................. 99
Creating an Annual Budget............................................... 66
Step 5: Calculate Net Provincial
Improving the Budget........................................................ 67
Tax Payable........................................................ 99
Alternative Budgeting Strategies........................................ 67
Step 6: Calculate Total Tax Payable..................... 102
Personal Balance Sheet....................................... 69
Assets............................................................................... 69 Step 7: Determine Total Tax Already Paid............. 102
Liabilities........................................................................... 70 Step 8: Refund or Balance Owing........................ 102
Net Worth......................................................................... 71
Creating a Personal Balance Sheet.................................... 71
Tax Planning Strategies...................................... 103
Types of Income.............................................................. 103
Changes in the Personal Balance Sheet............................. 72
Sources of Income.......................................................... 105
How Cash Flows Affect the Personal Balance Sheet........... 74
RRSP Contributions........................................................ 106
Financial Ratio Calculations................................ 74 Deductions and Tax Credits............................................. 107
Liquidity............................................................................ 74 Record Keeping.............................................................. 107
Debt Level......................................................................... 75
Savings Ratio.................................................................... 76 SUMMARY................................................. 108
Review Questions............................................................ 108
SUMMARY................................................... 77 Financial Planning Problems........................................... 109
Review Questions.............................................................. 78 Challenge Questions........................................................ 110
Financial Planning Problems............................................. 79 Ethical Dilemma.............................................................. 110
Challenge Questions.......................................................... 80 Financial Planning Online Exercises................................ 111
Ethical Dilemma................................................................ 80 Psychology of Personal Finance: Your Taxes.................... 111
Financial Planning Online Exercises.................................. 80 Mini-Case: Tax Deductions and Tax Credits...................... 111
Psychology of Personal Finance: Your Cash Outflows......... 81 Study Guide.................................................................... 112
Mini-Case 1: Personal Financial Statement Analysis........... 81
Study Guide...................................................................... 82
Appendix 4A Comprehensive
Tax Example...................................................... 115
Chapter 4 Part 1: Brad MacDonald—

A Continuing Case............................................. 130
Using Tax Concepts for Planning.............. 85
Case Questions............................................................... 130
Background on Taxes.......................................... 86
Taxes Paid on Earned Income........................................... 86
Taxes Paid on Consumer Purchases.................................. 87
Taxes Paid on Capital Assets............................................. 87 PART 2 MANAGING YOUR
Taxes Paid on Property...................................................... 88 FINANCIAL RESOURCES
Do You Have To File a Return?............................. 88
Why Students Should File Tax Returns.............................. 89 Chapter 5
Filing Your Return............................................................. 89 Banking Services and
Overview: Completing an Income Tax Return......... 90
Managing Your Money............................ 134
Background on Money Management.................... 135
Step 1: Calculate Total Income............................ 92
Liquidity.......................................................................... 135
Wages and Salaries........................................................... 92
Self-Employment Income.................................................. 92 Types of Financial Institutions............................ 136
Interest Income................................................................. 92 Depository Institutions..................................................... 137
Dividend Income............................................................... 93 Non-Depository Institutions............................................. 139
A01_MADU4713_04_SE_FM.indd 7 08/12/17 3:36 PM

viii Contents
Banking Services Offered Consumer Credit Products.................................. 164

by Financial Institutions..................................... 140
Credit Cards...................................................... 164
Chequing Services.......................................................... 140
Types of Credit Cards...................................................... 165
Debit Cards..................................................................... 140
Credit Limit..................................................................... 166
Online Banking............................................................... 142
Overdraft Protection........................................................ 166
Interac® e-Transfer.......................................................... 142
Annual Fee..................................................................... 166
Credit Card Financing..................................................... 142
Incentives to Use the Card.............................................. 166
Safety Deposit Boxes....................................................... 143
Grace Period................................................................... 166
Automated Banking Machines (ABMs)............................ 143
Cash Advances/Convenience Cheques............................ 167
Certified Cheques............................................................ 143
Financing........................................................................ 167
Money Orders and Drafts................................................ 143
Minimum Monthly Payments........................................... 169
Traveller’s Cheques......................................................... 144
Credit Card Statement..................................................... 169
Selecting a Financial Institution.......................... 144 Comparing Credit Cards.................................................. 170
Convenience................................................................... 144
Home Equity Line of Credit (HELOC)................... 172
Deposit Rates and Insurance........................................... 144
Credit Limit on a HELOC.................................................. 172
Fees............................................................................... 145
Interest Rate................................................................... 173
Savings Alternatives Offered
Personal Loans.................................................. 173
by Financial Institutions..................................... 145
Loan Contract................................................................. 173
Tax-Free Savings Account (TFSA).................................... 145
The Real Cost of Borrowing on Personal Loans................ 176
Savings Deposits............................................................. 145
Term Deposits................................................................. 146 Car Loans......................................................... 178
Guaranteed Investment Certificates................................. 146 Selecting the Car............................................................. 178
Canada Savings Bonds (CSBs)........................................ 148 Negotiating the Price....................................................... 179
Money Market Funds (MMFs)......................................... 148 Financing Decisions........................................................ 180
Determining the Optimal Allocation of Short-Term Purchase versus Lease Decision...................................... 181
Investments.................................................................... 148
Student Loans................................................... 183
SUMMARY................................................. 149 Debt Management............................................. 184
Review Questions............................................................ 150 Review Your Personal Financial Statements..................... 184
Financial Planning Problems........................................... 150 Consumer Proposal......................................................... 185
Challenge Questions........................................................ 152 Bankruptcy..................................................................... 185
Ethical Dilemma.............................................................. 152 Avoid Credit Repair Services............................................ 186
Financial Planning Online Exercises................................ 152
Psychology of Personal Finance: Paying Your Bills........... 153 Identity Theft: A Threat to Your Credit.................. 186
Mini-Case 1: Money Management................................... 153 The Scope of Identity Theft.............................................. 186
Mini-Case 2: Savings Alternatives.................................... 154 The Cost of Identity Theft................................................ 186
Study Guide.................................................................... 154 Identity Theft Tactics......................................... 187
Shoulder Surfing............................................................. 187
Dumpster Diving............................................................. 187
Chapter 6 Skimming....................................................................... 187
Assessing, Managing, Pretexting, Phishing, and Pharming................................. 187
and Securing Your Credit.......................... 157 Abusing Legitimate Access to Records............................ 188
Crime Rings.................................................................... 188
Background on Credit......................................... 158
Violating Your Mailbox..................................................... 188
Types of Credit................................................................ 158
Advantages of Using Credit............................................. 158 Protecting Against Identity Theft......................... 188
Disadvantages of Using Credit......................................... 159
Response to Identity Theft.................................. 189
Credit History.................................................................. 159
The Credit Application Process........................................ 160
SUMMARY................................................. 191
Credit Insurance............................................................. 161
Credit Bureaus.................................................. 161 Financial Planning Problems........................................... 194
Credit Score.................................................................... 162 Challenge Questions........................................................ 195
Reviewing Your Credit Report.......................................... 164 Ethical Dilemma.............................................................. 196

Contents ix

Psychology of Personal Finance: Your Credit
PART 3 PROTECTING YOUR WEALTH
Cards and Car Loans....................................................... 197 Chapter 8
Mini-Case 1: Credit Card Use.......................................... 197
Mini-Case 2: Car Ownership............................................ 198
Auto and Homeowner’s Insurance............ 234
Study Guide.................................................................... 198 Background on Insurance................................... 235
Managing Risk.................................................. 235
Chapter 7 Avoid Risk....................................................................... 235
Purchasing and Financing a Home.......... 201 Reduce Risk................................................................... 235
Selecting a Home.............................................. 202 Accept Risk.................................................................... 236
How Much Can You Afford?............................................. 202 Share Risk...................................................................... 236
Affordable Down Payment............................................... 204 Role of Insurance Companies.............................. 237
Affordable Monthly Mortgage Payments........................... 204 Insurance Company Operations....................................... 238
Criteria Used to Select a Home........................................ 205 Role of Insurance Agents and Brokers............................. 238
Relying on a Realtor........................................................ 206
Using Online Realtor Services.......................................... 206 Auto Insurance.................................................. 239
Negotiating a Price.......................................................... 207 Auto Insurance Policy Provisions..................................... 240
Section A: Third Party Liability Coverage.......................... 240
Transaction Costs of Purchasing a Home.............. 207 Section B: Accident Benefits........................................... 241
Down Payment................................................................ 208
Section C: Loss of or Damage to Insured Automobile....... 242
Closing Costs.................................................................. 210
Facility Association.......................................................... 243
Mortgage Options.............................................. 213 No-Fault Auto Insurance................................................. 243
Amortization Period......................................................... 213 Other Endorsement Forms.............................................. 243
Mortgage Term................................................................ 213 Summary of Auto Insurance Provisions............................ 244
Payment Frequency........................................................ 213
Factors That Affect Your Auto Insurance
Mortgage Type................................................................ 214
Premiums........................................................245
Characteristics of a Fixed-Rate Mortgage.............. 215 Comparing Premiums among Insurance Companies........ 246
Amortization Schedule.................................................... 216
Impact of the Mortgage Amount, Interest Rate, If You Are In an Auto Accident............................ 247
and Amortization Period on Monthly Payments................ 216 Homeowner’s Insurance...................................... 248
Characteristics of a Variable-Rate Mortgage.......... 218 Types of Perils Covered by Homeowner’s Insurance......... 248
Initial Rate...................................................................... 218 Homeowner’s Insurance Policy Provisions............. 248
Interest Rate Index.......................................................... 218 Building (Property Damage)............................................ 249
Decision to Own versus Rent a Home................... 219 Other Structures on Property........................................... 250
Estimating the Total Cost of Renting and Owning............. 219 Contents (Personal Property)........................................... 250
Policy Limits and Exclusions............................................ 250
Mortgage Refinancing........................................ 221 Liability........................................................................... 250
Rate Modification............................................................ 221 Other Types of Expenses................................................. 251
Refinancing Analysis....................................................... 222 Expenses Incurred by Homeowner’s Insurance Companies....251
SUMMARY................................................. 222 Homeowner’s Insurance Premiums...................... 252
Review Questions............................................................ 223 Factors That Affect Homeowner’s Insurance Premiums...... 252
Financial Planning Problems........................................... 224 Reducing Your Homeowner’s Insurance Premium........... 252
Challenge Questions........................................................ 225
Ethical Dilemma.............................................................. 226 Filing a Claim.................................................... 253
Financial Planning Online Exercises................................ 226 Tenant’s Insurance............................................. 253
Psychology of Personal Finance: Tenant’s Insurance Policy Provisions............................... 253
Your Cash Outflows......................................................... 227
Mini-Case 1: Home Ownership........................................ 227 Umbrella Personal Liability Policy....................... 253
Mini-Case 2: Mortgage Planning...................................... 228
SUMMARY................................................. 254
Part 2: Brad MacDonald—A Review Questions............................................................ 254
Continuing Case................................................ 228 Ethical Dilemma.............................................................. 255
Case Questions............................................................... 229 Financial Planning Online Exercises................................ 255
Study Guide.................................................................... 230 Psychology of Personal Finance: Your Auto Insurance..... 256

x Contents
Mini-Case 1: Auto Insurance........................................... 256

Mini-Case 2: Homeowner’s Insurance............................. 256
PART 4 PERSONAL INVESTING
Study Guide.................................................................... 257 Chapter 10
Chapter 9 Investing Fundamentals......................... 294
Health and Life Insurance...................... 259 Types of Investments.......................................... 295
Money Market Securities................................................. 295
Background on Health and Life Insurance............ 260
Stocks............................................................................. 295
Canada’s Health Care System.............................. 261 Bonds............................................................................. 298
Role of the Federal Government...................................... 261 Mutual Funds................................................................. 298
Role of the Provincial and Territorial Governments........... 262 Real Estate...................................................................... 299
Role of Private Health Insurance..................................... 262
Investment Return and Risk................................ 299
Disability Insurance........................................... 264 Measuring the Return on Your Investment....................... 299
Disability Insurance Provisions........................................ 266
How Wealth Is Influenced by Your Return
Critical Illness Insurance.................................... 267 on Investment................................................................. 301
Long-term Care Insurance................................... 268 Risk of Investing.............................................................. 302
Long-term Care Insurance Provisions.............................. 268 Trade-off between Return and Risk...................... 303
Other Factors That Affect Long-term Care Insurance Return–Risk Trade-off among Stocks............................... 303
Premiums....................................................................... 269 Return–Risk Trade-off among Bonds............................... 304
Reducing Your Cost for Long-term Care Insurance........... 269 Return–Risk Trade-off among Mutual Funds.................... 304
Determining the Amount of Coverage.............................. 269 Return–Risk Trade-off among Real Estate
Life Insurance................................................... 269 Investments.................................................................... 305
Term Insurance............................................................... 270 Comparing Different Types of Investments....................... 305
Permanent Insurance...................................................... 273
How Diversification Reduces Risk........................ 306
Determining the Amount of Benefits of Portfolio Diversification................................... 306
Life Insurance Needed....................................... 277 Determining Portfolio Benefits......................................... 307
Income Method............................................................... 277 Factors That Influence Diversification Benefits................. 308
Budget Method............................................................... 278
Strategies for Diversifying................................... 309
Contents of a Life Insurance Policy...................... 280 Diversification of Stocks across Industries........................ 309
Beneficiary...................................................................... 280 Diversification of Stocks across Countries........................ 310
Grace Period................................................................... 280
Reinstatement................................................................. 280 Asset Allocation Strategies................................. 311
Living Benefits................................................................ 280 Including Bonds in Your Portfolio..................................... 311
Premium Schedule......................................................... 280 Including Income Trust Investments in Your Portfolio....... 312
Loans.............................................................................. 280 How Asset Allocation Affects Risk.................................... 311
Suicide Clause................................................................ 281 An Affordable Way to Conduct Asset Allocation................ 312
Incontestability Date........................................................ 281
Factors That Affect Your Asset
Misstatement of Age or Sex............................................. 281
Allocation Decision............................................ 313
Renewability and Conversion Options.............................. 281
Your Stage in Life............................................................ 313
Riders............................................................................. 281
Your Degree of Risk Tolerance......................................... 314
SUMMARY................................................. 283 Your Expectations about Economic Conditions................. 315
Learning from Investment Mistakes..................... 315
Financial Planning Problems........................................... 285
Making Decisions Based on Unrealistic Goals.................. 315
Challenge Questions........................................................ 286
Borrowing to Invest......................................................... 316
Ethical Dilemma.............................................................. 286
Taking Risks to Recover Losses from Previous
Investments.................................................................... 316
Psychology of Personal Finance: Your Life Insurance....... 287
Mini-Case 1: Group Insurance......................................... 288
SUMMARY................................................. 317
Mini-Case 2: Life Insurance............................................. 288
Study Guide.................................................................... 289
Financial Planning Problems........................................... 319
Part 3: Brad MacDonald—A Challenge Questions........................................................ 320
Continuing Case................................................ 291 Ethical Dilemma.............................................................. 320
Case Questions............................................................... 291 Financial Planning Online Exercises................................ 320

Contents xi
Psychology of Personal Finance: Your Investments.......... 321 Bond Trading in the Secondary Market............................ 359
Mini-Case 1: Investment Planning................................... 321 Term Structure of Interest Rates...................................... 359
Mini-Case 2: Diversification............................................. 322
Types of Bonds.................................................. 360
Study Guide.................................................................... 322
Government of Canada Bonds......................................... 360
Federal Crown Corporation Bonds................................... 360
Chapter 11 Provincial Bonds............................................................. 361
Investing in Stocks................................ 325 Municipal Bonds............................................................. 361
Corporate Bonds............................................................. 361
Stock Exchanges............................................... 326
Over-the-Counter (OTC) Market....................................... 327 Other Fixed-Income Products.............................. 362
Short-Term Debt Securities.............................................. 362
Stock Quotations............................................... 327 Canada Savings Bonds (CSBs)........................................ 363
Purchasing or Selling Stocks............................... 328 Mortgage-Backed Securities (MBSs)............................... 363
Selecting a Broker........................................................... 328 Strip Bonds..................................................................... 363
Placing an Order............................................................. 329 Real Return Bonds.......................................................... 364
Placing an Order Online.................................................. 331 Return from Investing in Bonds........................... 364
Buying Stock on Margin.................................................. 331 Impact of Interest Rate Movements
Analyzing Stocks............................................... 332 on Bond Returns.............................................................. 364
Analyzing a Firm’s Financial Condition............................. 332 Tax Implications of Investing in Bonds............................. 365
Firm-Specific Characteristics........................................... 334 Valuing a Bond.................................................. 365
Economic Analysis of Stocks........................................... 336
Industry Analysis of Stocks.............................................. 337 Risk from Investing in Bonds.............................. 366
Industry Indicators.......................................................... 338 Default Risk.................................................................... 367
Integrating Your Analyses................................................ 339 Call Risk......................................................................... 368
Inflation Risk................................................................... 368
Stock Valuation................................................. 340 Reinvestment Risk.......................................................... 368
Dividend Discount Model (DDM) Method......................... 340 Interest Rate Risk............................................................ 368
Price–Earnings (P/E) Method........................................... 340
Stock Market Efficiency................................................... 341 Bond Investment Strategies................................ 369
Interest Rate Strategy...................................................... 369
Assessing Performance of Stock Investments........ 342 Passive Strategy.............................................................. 370
Comparing Returns to an Index....................................... 342 Maturity Matching Strategy.............................................. 370
SUMMARY................................................. 343 SUMMARY................................................. 370
Review Questions............................................................ 343 Review Questions............................................................ 371
Financial Planning Problems........................................... 345 Financial Planning Problems........................................... 372
Challenge Questions........................................................ 345 Challenge Questions........................................................ 373
Ethical Dilemma.............................................................. 346 Ethical Dilemma.............................................................. 373
Financial Planning Online Exercises................................ 346 Financial Planning Online Exercises................................ 373
Psychology of Personal Finance: Your Investments.......... 347 Psychology of Personal Finance:
Mini-Case 1: Financial Ratio Calculations Buying Risky Bonds........................................................ 374
and Analysis................................................................... 347 Mini-Case 1: Bond Ratings and Calculations.................... 374
Mini-Case 2: Using Stock Quotes..................................... 348 Mini-Case 2: Purchasing Bonds...................................... 375
Study Guide.................................................................... 348 Study Guide.................................................................... 375
Appendix 11A Including
Stock Options in Your Portfolio............................ 351 Chapter 13
Investing in Mutual Funds...................... 377
Chapter 12 Background on Pooled Investment Funds............. 378
Investing in Bonds................................. 355 Background on Mutual Funds............................. 378
Background on Bonds........................................ 356 Advantages of Investing in Mutual Funds......................... 379
Bond Characteristics....................................................... 357 Disadvantages of Investing in Mutual Funds.................... 379
Yield to Maturity.............................................................. 358 Net Asset Value per Share............................................... 379

xii Contents
Open-End versus Closed-End Funds............................... 380 Employer-Sponsored Retirement Plans................. 411

Load versus No-Load Funds............................................ 381 Defined-Benefit Pension Plans.........................................411
Management Expense Ratio (MER)................................. 383 Defined-Contribution Pension Plans................................ 413
Types of Mutual Funds....................................... 383 Individual Retirement Savings Plans.................... 416
Types of Equity Mutual Funds......................................... 383 Registered Retirement Savings Plans (RRSPs)................. 416
Types of Bond Mutual Funds........................................... 385 Tax-Free Withdrawals from an RRSP............................... 418
Tax-Free Savings Accounts (TFSAs)................................ 419
Return and Risk of a Mutual Fund....................... 386
Locked-in Retirement Accounts (LIRAs).......................... 420
Return from Investing in a Mutual Fund.......................... 387
Risk from Investing in an Equity Mutual Fund.................. 387 Retirement Income Conversion Options................ 421
Trade-off between Expected Return and Risk Retirement Income Conversion Options
of Equity Funds............................................................... 388 for RRSPs and TFSAs..................................................... 421
Risk from Investing in a Bond Mutual Fund..................... 389 Retirement Income Conversion Options for a LIRA........... 422
Trade-off between Expected Return and Risk Reverse Mortgages.......................................................... 423
of Bond Funds................................................................ 389
Your Retirement Planning Decisions.................... 423
Deciding among Mutual Funds............................ 389 Which Retirement Plan Should You Pursue?.................... 423
Reviewing a Mutual Fund’s Fund Facts........................... 390 How Much Should You Contribute?.................................. 424
How Should You Invest Your Contributions?..................... 425
Quotations of Mutual Funds................................ 391
Estimating Your Future Retirement
Exchange-Traded Funds (ETFs)........................... 392
Savings............................................................. 427
Segregated Funds.............................................. 392 Estimating the Future Value of One Investment................ 427
Principal Protection......................................................... 392 Estimating the Future Value of a Set
Death Benefit Guarantee................................................. 393 of Annual Investments..................................................... 430
Creditor Protection.......................................................... 393
Assessing the Value of Protection.................................... 393 SUMMARY................................................. 432
SUMMARY................................................. 394 Financial Planning Problems........................................... 435
Review Questions............................................................ 395 Challenge Questions........................................................ 436
Financial Planning Problems........................................... 396 Ethical Dilemma.............................................................. 436
Challenge Questions........................................................ 396 Financial Planning Online Exercises................................ 437
Ethical Dilemma.............................................................. 396 Psychology of Personal Finance:
Financial Planning Online Exercises................................ 397 Your Retirement.............................................................. 437
Psychology of Personal Finance: Investing Mini-Case 1: Calculating Retirement Income................... 438
in Mutual Funds.............................................................. 397 Study Guide.................................................................... 438
Mini-Case 1: Types of Mutual Funds................................ 398
Mini-Case 2: Mutual Fund Selection................................ 398
Study Guide.................................................................... 398 Chapter 15
Part 4: Brad MacDonald—A Estate Planning..................................... 441
Continuing Case................................................400
Background on Wills.......................................... 442
Case Questions............................................................... 401
Creating a Valid Will........................................................ 442
Common Types of Wills...................................... 443

PART 5 RETIREMENT AND ESTATE Key Components of a Will................................... 443
PLANNING Changing Your Will.......................................................... 448
Chapter 14 Probate Fees and Taxes at Death......................... 448

Executing the Will during Probate.................................... 448
Retirement Planning.............................. 404
The Final Tax Return....................................................... 449
Old Age Security................................................ 405 Optional Tax Returns....................................................... 450
Old Age Security (OAS) Program..................................... 405
Estate Planning Strategies.................................. 450
Canada Pension Plan......................................... 407 Joint Tenancy with Rights of Survivorship
Canada Pension Plan (CPP) Program.............................. 407 (JTWROS)....................................................................... 450
Concern about Retirement Benefits in the Future............ 410 Beneficiary Designations................................................. 451

Contents xiii
Trusts............................................................................. 451 Appendix A Projects............................ 477

Contributions to Charitable Organizations......................... 452
Assessing Your Credit..................................... 477
Other Aspects of Estate Planning........................ 453
Living Will....................................................................... 453 Career Planning Project.................................. 478
Power of Attorney............................................................ 453 Information on Career Planning.................................. 478
Maintaining Estate Planning Documents.......................... 454 Leasing an Apartment.................................... 479
SUMMARY................................................. 454 Stock Market Project...................................... 480
Review Questions............................................................ 455 Obtaining Stock Price and Dividend
Ethical Dilemma.............................................................. 456 Information................................................................ 480
Financial Planning Online Exercises................................ 456 Enter the Stock Information........................................ 480
Psychology of Personal Finance: Your Will....................... 456 Determine Your Gain over the School Term................. 481
Mini-Case: Estate Planning.............................................. 457 Comparing Your Stock to the General Market.............. 481
Study Guide.................................................................... 457 Team Project.............................................................. 481
Part 5 Brad MacDonald—A Comparison Shopping: Online
Continuing Case................................................ 459 versus Local Purchases................................... 481
Case Questions............................................................... 459
Mortgage Case Project.................................... 482
Mutual Fund Comparison Project..................... 483
PART 6 SYNTHESIS OF FINANCIAL Category: Canadian Equity.......................................... 484
PLANNING
Chapter 16 Appendix B Your Career....................... 485
Integrating the Components
Determining Your Career Path......................... 485
of a Financial Plan............................... 462 Factors That May Affect Your Career Path................... 485
Review of Components within Sources of Information That Can Help
a Financial Plan................................................ 463 You to Select Your Career Path................................... 485
Budgeting....................................................................... 463
Getting the Skills You Need............................ 486
Managing Finances......................................................... 463
Training...................................................................... 486
Financing........................................................................ 464
Education................................................................... 487
Protecting Your Assets and Income................................. 464
Expanding Your Education.......................................... 487
Managing Investments.................................................... 464
Retirement Planning....................................................... 465 Changing Your Career..................................... 487
Maintaining Your Financial Documents............................ 465 Self-Employment........................................................ 488
Integrating the Components................................ 466 Criteria Used to Assess Applicants................... 488

Your Application......................................................... 488
SUMMARY................................................. 473 Your Resumé............................................................. 488
Review Questions............................................................ 473 Job Interviews............................................................ 488
Financial Planning Problems........................................... 473 Conclusion................................................................. 489
Psychology of Personal Finance:
Your Financial Plan......................................................... 474 Glossary................................................................. 490
Mini-Case: Financial Planning......................................... 474 Index..................................................................... 499
Study Guide.................................................................... 475 Answers to Study Guide Questions......................... 519

PREFACE
When will you be able to buy a home? Can you afford a new car or a vacation? How can
you pay off your credit card balance? What should you invest in?
The answers to these questions are tied directly to how you, as a student, manage
your finances. Managing your finances wisely will bring a sense of security and freedom
that you can enjoy for years to come. Very few courses you will take throughout your
post-secondary career will have the potential to profoundly shape your future like a
personal finance course. Taking this course is your first step on the path toward a stable
financial future.
With Personal Finance, Fourth Canadian Edition, as your guide, you will master key
concepts that will aid you in managing and increasing your personal wealth. The aim
of this textbook is to equip you with knowledge and decision-making tools to help you
make sound financial decisions.
New to the Fourth Canadian Edition
Revised Chapter Introduction Cases

Each chapter opens with a chapter introduction, with student-centric scenarios that
include at least two discussion questions designed to introduce important concepts and
themes covered in the chapter.
Free Apps for Personal Finance

Throughout each chapter, students are advised of a variety of useful applications that
they can download to their smartphones, for free, that apply to many of the key concepts
covered in the chapter.
Psychology of Personal Finance

Personal finance behaviour is influenced by psychology. For example, some spending
decisions are made on impulse due to the desire for immediate satisfaction. A feature
called Psychology of Personal Finance explains how financial planning decisions are
affected by psychology. At the end of every chapter, there is also an accompanying sec-
tion that tests students’ understanding of how psychological forces influence personal
finance decisions.
End-of-Chapter Challenge Questions

Multi-step financial planning problems called Challenge Questions require deeper
analysis, inviting students to apply knowledge and demonstrate chapter material
comprehension.
xiv

Preface xv
End-of-Chapter Mini-Cases
At the end of each chapter, new mini-cases provide students with an opportunity to syn-
thesize and to apply a number of concepts from each chapter in a practical manner. There
are one to two mini-cases per chapter.
More Visual Exhibits

More exhibits appear throughout the entire book to enhance concept retention and to
provide a visual representation of facts and figures.
Improved Ethical Dilemmas

End-of-chapter ethical scenarios focus on topics of student interest to engage the reader.
Designed to help students apply ethical principles to financial situations and problems,
these real-life ethical situations are presented along with critical thinking questions.
Key Chapter Updates

Chapter 1: In addition to being SMART (specific, measurable, action-oriented,
realistic, and time bound), goals must be prioritized. The idea of
prioritizing your goals is introduced through a new mini case and
the use of an online tool that helps students understand that goals
need to be considered in terms of their priority relative to your
personal situation.
Chapter 2: The discussion of the simple interest formula, I = P * r * t, has
been expanded to include variations of this formula that allow stu-
dents to solve for P, r, and t. In addition, a new learning outcome
provides a brief discussion and example calculations for solving
for the number of compounding periods (N) and the nominal
annual interest rate (I/Y). At the end of the chapter, a revised and
expanded list of financial planning problems provides students
with an opportunity to use their financial calculator to solve for
all time value of money variables.
Chapter 3: A summary of the budgeting steps covered in Learning Outcome 3,
Creating a Budget, is provided at the end of the section. This sum-
mary will help reinforce the actions that are required in this critical
component of personal financial planning.
Chapter 5: The topic of Interac e-transfers is introduced for the first time in
this edition as a new banking service available to Canadians.
Chapter 6: A new table summarizing the advantages and disadvantages of
using credit is introduced in this edition. The home equity loan
has been reintroduced as the home equity line of credit, HELOC,
in order to better reflect how these types of secured credit facili-
ties are set up in Canada. The section on negotiating the price of a
car has been expanded so as to provide further guidance to those
students who are in the market for a car—now or in the future.
Chapter 7: The section on mortgage refinancing is now complemented by
a new example calculation for a blend-and-extend mortgage
refinancing.
Chapter 8: The concept of maintaining a minimum amount of coverage on a
homeowner’s insurance policy that provides replacement cost cov-
erage is clarified with the use of a detailed example.

xvi Preface
Chapter 11: The topic of electronic trading systems is expanded with a discus-
sion of the bid price, ask price, and the bid–ask spread, includ-
ing definitions and examples. Learning Outcome 4 has been better
organized, updated, and renamed How to Analyze Stocks. Learn-
ing Outcome 5 on Stock Valuation has been updated to include a
discussion on the two main methods to value a stock—the intrinsic
valuation mode and the relative valuation model.
TRIED AND TRUE LEARNING TOOLS IN THE FOURTH

CANADIAN EDITION
Learning Objectives
Corresponding to the main headings in each chapter, and indicated by marginal callouts
throughout the chapter, the list of learning objectives guides students through the material.
Marginal Glossary
Throughout the text, key terms and their definitions appear in the text margin where
they are first discussed.
Explanation by Example
Practical examples applying concepts in realistic scenarios throughout the chapters help
cement student understanding of key concepts.
Myth or Fact
Throughout the text, “Myth or Fact” features highlight popular misconceptions about
financial planning; providing students with an opportunity to reinforce key ideas from the
chapter and/or to use their intuition to determine whether a statement is a myth or a fact.
Summary
In bullet form, the summaries correlate the key points from each chapter with the learn-
ing objectives provided at the beginning of the chapter.
Review Questions
The Review Questions test students’ understanding by asking them to compare and con-
trast concepts, interpret financial quotations, and decide how financial data can be used
to make personal finance decisions.
Financial Planning Problems

At the end of each chapter, Financial Planning Problems require students to demonstrate
knowledge of mathematically based concepts to perform computations in order to make
well-informed personal finance decisions.
End-of-Chapter Study Guide

Each chapter concludes with 10 multiple-choice and 10 true/false study questions for
extra review.

Preface xvii
AN INTERACTIVE APPROACH
Personal Finance’s interactive approach incorporates online resources along with many
examples, problems, and ongoing case studies, all of which focus on providing students
with hands-on practice applying financial concepts.
MyLab Finance
This integrated online homework tool gives students the hands-on practice and tutorial
assistance they need to learn skills efficiently. Ample opportunities for online practice
and assessment in MyLabTM Finance are seamlessly integrated into the content of each
chapter and organized by section within the chapter summaries. Select Financial Plan-
ning Problems and Bonus questions are available in the Study Plan, and select Review
Questions, new Chapter Test questions, and new Financial Literacy Test questions are
available for instructors to assign. MyLab Finance also includes helpful financial plan-
ning tools such as financial calculators and tutorials and glossary flashcards. Please visit
MyLab Finance for more information and to register.
Build Your Own Financial Plan

Personal Finance’s structure mirrors a comprehensive financial plan. In each chapter,
students learn the skills they need to build their own financial plan. The Build Your Own
Financial Plan exercises are an integrated series of problems and worksheets that pres-
ent a portion of a financial plan based on the concepts presented in each chapter. The
exercises and associated worksheets are available on MyLab Finance. At the end of the
course, students will have completed a financial plan that they can continue to implement
beyond the school term.
Financial Planning Weblinks

In every chapter, marginal weblinks highlight useful internet resources. You will find a
website address and a description of what type of information the website provides.
Financial Planning Online Exercises

At the end of each chapter, Financial Planning Online Exercises show students how to
obtain, critically evaluate, and use internet-based resources in making personal finance
decisions.
Build a Financial Plan for the Sampson family

The parents of two children, Dave and Sharon Sampson, have made few plans regarding
their financial future. They are eager to start saving toward a new car, their children’s
post-secondary education, and their retirement. Students apply chapter concepts to coun-
sel the Sampsons. The Sampsons—A Continuing Case chapter-end cases and accompany-
ing worksheets are provided on MyLab Finance.
Appendix A: Projects
Appendix A provides a number of projects for students to complete relating to specific
aspects of personal finance. The list of projects includes:
■■ Assessing Your Credit
■■ Career Planning Project

xviii Preface
■■ Leasing an Apartment
■■ Stock Market Project
■■ Comparison Shopping: Online versus Local Purchases
■■ Mortgage Case Project
■■ Mutual Fund Comparison Project
Appendix B: Your Career

Appendix B provides direction on determining and managing your career. Topics include:
■■ Determining Your Career Path
■■ Getting the Skills You Need
■■ Changing Your Career
Real-Life Scenarios
Students are prompted to build a financial plan for Brad MacDonald using the Brad
MacDonald—A Continuing Case scenarios that are provided at the end of each part of
the text. Brad has expensive tastes—as evidenced by his soaring credit card balance—and
he needs assistance in gaining control over his finances. The accompanying worksheets
for Brad MacDonald—A Continuing Case are available on MyLab Finance.
HALLMARKS OF PERSONAL FINANCE,

FOURTH CANADIAN EDITION
We recognize that students who decide to take a course in personal finance have a variety
of academic backgrounds, interests, and personal goals. For some, such a course might
be a prerequisite to a future in finance or business. Others may decide to take the course
because they want to learn more about how to create a budget or to plan for a large pur-
chase such as a car on their current income. Our aim with this text is to provide students
with all the tools they need to fully understand and plan their personal finances in a way
that is useful, engaging, and rewarding.
Textbook Content and Organization

We have organized this text into a logical chapter order. The first chapter establishes the
text’s organization by introducing students to the key components of a financial plan.
The text is then organized into six parts, beginning with Chapter 2, which are keyed to
the components of a comprehensive financial plan.
Part 1: Tools for Financial Planning
Part 2: Managing Your Financial Resources
Part 3: Protecting Your Wealth
Part 4: Personal Investing
Part 5: Retirement and Estate Planning
Part 6: Synthesis of Financial Planning

Preface xix
Key Topics in the Fourth Canadian Edition

of Personal Finance
We have included several important topics for Canadian students in this edition. You
will find some examples of these key discussions in the following chapters:
Chapter 2: In Chapter 2, we discuss the importance of the time value of money
(TVM) concept and provide a step-by-step introduction to the cal-
culator steps, using the TI BA II Plus calculator, used to perform
TVM calculations.
Chapter 4: In Chapter 4, we provide background on taxes and tax planning
strategies, and then provide an appendix that guides students step
by step through the process of completing a tax return.
Chapter 6: In Chapter 6, we discuss identity theft, different identity theft tac-
tics, and ways to protect against this kind of theft.
Chapter 9: In Chapter 9, we discuss the various levels of health and life insur-
ance coverage available to Canadians, including disability, critical
illness, and long-term care.
Chapter 10: In Chapter 10, we examine different types of investments and the
trade-offs that need to be considered when examining investment
return and risk.
Chapter 11: In Chapter 11, we show students how to complete an analysis of
a firm, an economic analysis of stocks, and an industry analysis of
stocks in order to determine an investment strategy.
Chapter 14: In Chapter 14, we present a comprehensive review of public and
private retirement options, including the process of converting
retirement assets to income.
Decision-Making Emphasis
All of the information presented in this book is geared toward equipping students with
the expertise they need to make informed financial decisions. Each chapter establishes a
foundation for the decisions that form the basis of a financial plan. When students com-
plete each chapter, they are, therefore, prepared to complete the related financial plan
subsection provided on MyLab Finance. Key to understanding personal finance is know-
ing how to apply concepts to real-life planning scenarios. The many examples, financial
planning problems, exercises, and cases place students in the role of the decision-maker
and planner.
Focus on Opportunity Costs

Personal Finance calls attention to the trade-offs involved in financial decisions. The
decision to buy a new car affects the amount of funds available for recreation, rent, insur-
ance, and investments. The text uses numerous examples and exercises to illustrate and
teach students about the interdependence of personal finance decisions.
The quantitative side of financial planning intimidates many students. Personal
Finance simplifies the mathematics of personal finance by explaining its underlying logic.
Formulas and calculations are explained in the text and then illustrated in examples.
Examples that can be solved using a financial calculator are depicted with a keypad illus-
tration. Students are referred to websites with online calculators whenever pertinent. The
Financial Planning Problems and Financial Planning Online Exercises provide students
with ample opportunity to practise applying math-based concepts.

xx Preface
INSTRUCTOR AND STUDENT SUPPORT PACKAGE

The following array of supplementary materials is available to help busy instructors teach
more effectively and to allow busy students to learn more efficiently.
For Instructors
■■ Instructor’s Resource and Solutions Manual—This comprehensive manual
pulls together a wide variety of teaching tools and resources. Each chapter
contains a chapter overview, chapter objectives, teaching tips, and detailed
answers and step-by-step solutions to the Chapter Overview Questions,
Review Questions, Financial Planning Problems, Challenge Questions, Ethical
Dilemma Questions, Mini-Case Questions, Sampson family case questions,
and Myth or Fact Margin Questions. Each part concludes with solutions to
the Brad MacDonald case questions.
■■ Computerized Test Bank—Pearson’s computerized test banks allow instructors
to filter and select questions to create quizzes, tests, or homework. Instructors
can revise questions or add their own, and may be able to choose print or online
options. These questions are also available in Microsoft Word format.
■■ PowerPoint Slides®—This useful tool provides PowerPoint slides illustrating
key points from each chapter. Instructors can easily convert the slides to trans-
parencies or view them electronically in the classroom during lectures.
Learning Solutions Managers

Learning Solutions Managers work with faculty and campus course designers to ensure
that Pearson technology products, assessment tools, and online course materials are tai-
lored to meet your specific needs. This highly qualified team is dedicated to helping
schools take full advantage of a wide range of educational resources, by assisting in the
integration of a variety of instructional materials and media formats. Your local Pearson
Education sales representative can provide you with more details on this service program.
For Students
MyLab Finance
MyLab Finance provides students with personalized Study Plans and the opportunity for
additional practice. MyLab Finance also includes the Pearson eText. The Pearson eText
gives students access to their textbook anytime, anywhere. In addition to note taking,
highlighting, and bookmarking, the Pearson eText offers interactive and sharing features.
Instructors can share their comments or highlights, and students can add their own, creat-
ing a tight community of learners within the class.
Financial Planning Problems are available in the Study Plan, and the following
resources are also available:
■■ Build Your Own Financial Plan exercises and worksheets
■■ Brad MacDonald—Continuing Case
■■ The Sampson Family—Continuing Case
■■ Financial calculators and calculator tutorials
■■ Interactive Glossary Flashcards for all of the key terms in the text

Preface xxi
Read the Build Your Own Financial Plan exercises, then use the worksheets to gen-
erate a personal cash flow statement, create a personal balance sheet, and set personal
financial goals. After reading the case study, use the Continuing Case worksheets to pre-
pare cash flow statements and balance sheets for Brad MacDonald and for the Sampsons.
ACKNOWLEDGMENTS
I wish to acknowledge the help and support of the many people associated with Pearson
Canada who made this textbook possible, including Keara Emmett, Acquisitions Editor;
Patti Sayle, Developmental Editor; Sarah Gallagher, Project Manager; Revathi Viswana-
than, Production Editor; Heather MacDougall, Copy Editor; Joel Gladstone, Proofreader;
and Charmaine Felder, Technical Checker. I also wish to thank Cecile Wendlandt, who
provided the initial spark that gave me the energy to work on this project.
—Hardeep Gill
Get $500,000 in Virtual Cash, Apply the

Concepts Learned in Class, and Test Your
Trading Skills Against Your Classmates!
Manage a portfolio of stocks, bonds, and mutual funds.
With the purchase of this book, you are entitled to a 50% discount to
StockTrak.com, the leading portfolio simulation for the university market!
To take advantage of this offer, ask your professor to register on StockTrak.com

and create a custom trading challenge for your class. When you receive an
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your discount:
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This page intentionally left blank
CHAPTER
Overview of a
Financial Plan 1
A
fter a long semester that ended with their gradua-
tion from college, Mo (age 23) and Farah (age 23)
could not help but feel an overwhelming sense of Daxiao Productions/Shutterstock
satisfaction as they enjoyed the sand and surf on their post-graduation beach vacation. Now
that they were moving on with their respective careers, the soon-to-be-married couple faced a
new set of financial challenges.
As they imagined their financial futures, the young couple had to think about a number of
financial choices, some of which could only be accomplished at the expense of not reaching
other goals immediately. Should they buy a new car now? If they did buy a new car, how would
this decision impact their plans for their wedding and honeymoon? The couple also had to
consider whether they should move out of their apartment and buy a house. How would home
ownership impact their cash flow? Although it was a long way off, Mo and Farah were also won-
dering when they should start thinking about retirement. All of these decisions require detailed
planning, but the idea of establishing personal and financial goals for their futures seemed like
a difficult task. There was so much they wanted to do and they were not sure if they would ever
have the financial resources to do it all.
In a world where there are few guarantees, thorough financial planning, prudent financial man-
agement, and careful spending can help you achieve your financial goals.
The personal financial planning process enables you to understand a financial plan and to
develop a personal financial plan. The simple objective of financial planning is to make the
best use of your resources to achieve your financial goals. The sooner you develop your goals
and a financial plan to achieve those goals, the easier it will be to achieve them.
1
M01_MADU4713_04_SE_C01.indd 1 05/12/17 2:04 PM

2 Chapter 1 Overview of a Financial Plan
QUESTIONS:
1. What are some of the important financial decisions that Mo and Farah should consider at this stage
of their lives?
2. What steps should Mo and Farah take in order to establish their goals?
3. If they wanted professional advice, how should they go about finding a financial adviser?
THE LEARNING OBJECTIVES OF THIS CHAPTER ARE TO:

1. Explain how you could benefit from personal financial planning
2. Identify the key components of a financial plan
3. Outline the steps involved in developing a financial plan
L.O.1 HOW YOU BENEFIT FROM AN UNDERSTANDING

OF PERSONAL FINANCE
personal finance Personal finance, also referred to as personal financial planning, is the process of planning
(personal financial your spending, financing, and investing activities, while taking into account uncontrol-
planning) lable events such as death or disability, in order to optimize your financial situation over
The process of planning your
spending, financing, and time. A personal financial plan specifies your financial goals and describes the spending,
investing activities, while financing, and investing activities that are intended to achieve those goals and the risk
taking into account uncon- management strategies that are required to protect against uncontrollable events such
trollable events, such as as death or disability. Although Canada is one of the world’s wealthier countries, many
death or disability, in order to Canadians do not manage their financial situations well. Consequently, they tend to rely
optimize your financial situa-
tion over time. too much on credit and have excessive debt. Excessive debt levels affect your ability to
achieve important financial goals. Consider the following statistics:
personal financial plan
A plan that specifies your • As of June 2015, total consumer bankruptcies increased by 4.2 percent over the
financial goals and describes previous year.
the spending, financing, and • The personal savings rate has been decreasing for the past 30 years and was
investing activities that are
intended to achieve those
estimated to be at 4.2 percent as of the third quarter of 2015.
goals and the risk manage- • The delinquency rate on personal loans for youth aged 18 to 25 increased by
ment strategies that are 11.7 percent from 2015 to 2016.
required to protect against
uncontrollable events, such • From 2000 to 2014, the level of household debt relative to income has increased
as death or disability. from 110.1 percent to 166.1 percent, making Canadians the most indebted house-
holders among G7 countries.
• As of May 2016, the per capita debt of Canadians has increased to $17 995.
per capita debt Per capita debt represents the amount of debt each individual in Canada would
The amount of debt each have if total debt (consumer debt plus mortgages) were spread equally across the
individual in Canada would population.
have if total debt (consumer
debt plus mortgages) was You have numerous options regarding the choice of bank deposits, credit cards,
spread equally across the loans, insurance policies, investments, and retirement plans. All of these options involve
population.
decisions you will have to make for yourself. Relying on government benefits alone
may not provide you with the financial future you imagine for yourself. With an under-
standing of personal finance, you will be able to make decisions that can enhance your
financial situation. How much do you know about personal finance? Various govern-
ment agencies of various countries have attempted to assess financial literacy in recent
years. Surveys have documented that people tend to have very limited personal finance
skills. In addition, surveys have found that many people who believe they have strong
personal finance skills do not really understand some basic personal finance concepts.
M01_MADU4713_04_SE_C01.indd 2 08/12/17 11:31 AM

Another random document with
no related content on Scribd:
Fig. 30.—A piece of pork heavily
infected with pork measles
(Cysticercus cellulosæ), natural
size. (Stiles, Report U.S.A.
Bureau of Agriculture, 1901.)
Fig. 31.—An isolated pork-measle bladder-
worm (Cysticercus cellulosæ), with extended
head, greatly enlarged. (Stiles, Report U.S.A.
Causation. The cause of cysticercus disease in the pig may be

summed up in one phrase—viz., ingestion of eggs or embryos of
Tænia solium.
Young animals alone seem to contract the disease. After the age of
eight to ten months they appear almost entirely proof against it.
It is very rare in animals reared in confinement, but is relatively
common in those roaming at liberty; because they are much more
likely to discover human excrement and the embryos of tænia. The
eggs having been swallowed, the six-hooked embryos are set at
liberty in the intestine, perforate the tissues, enter the vessels, and
are carried by the blood into all parts of the body. Those alone
develop well which reach the interstitial and intermuscular
connective tissue. The others in the viscera usually disappear. Their
presence in the depths of the muscles produces slight general
disturbance and signs of local irritation, due to the development of
the cyst itself. At the end of a month the little vesicle is large enough
to be visible to the naked eye; in forty to forty-five days it is as large
as a mustard seed, and in two months as a grain of barley. Its
commonest seats are the abdominal muscles, muscular portions of
the diaphragm, the psoas, tongue, heart, the muscles of mastication,
intercostal and cervical muscles, the adductors of the hind legs, and
the pectorals.
Symptoms. The symptoms of invasion are so
little marked as usually to pass undetected.
Occasionally, when large quantities have been
ingested, signs of enteritis may occur, but these
are generally ascribed to some entirely different
cause. In some cases there is difficulty in moving,
and the grunt may be altered.
Certain authors declare that the thorax is
depressed between the front limbs, but this
symptom is of no particular value, and is also
common to osseous cachexia and rachitis.
Paralysis of the tongue and of the lower jaw is of
greater importance. In exceptional cases, where
the cysticerci are very numerous and penetrate
the brain, signs of encephalitis, vertigo, and
turning sickness (gid, sturdy) may be produced.
These signs, however, disappear, and the
cysticerci undergo atrophy. Interference with
movement may give rise to suspicion when the
toes of the fore and hind limbs are dragged along
the ground, and thus become worn. This
peculiarity is due to the presence of cysts in the Fig. 32.—Several
muscles of the limbs, but it occurs in an almost portions of an
identical form in osseous cachexia. adult pork-
One symptom alone is pathognomonic, and it measle
appears only at a very late stage—viz., the tapeworm
presence of cysts under the thin mucous (Tænia solium),
natural size.
membranes which are accessible to examination, (Stiles, Report
such as those of the tongue and eye. U.S.A. Bureau of
Visual examination then reveals beneath these Agriculture,
mucous membranes the presence of little 1901.)
greyish-white, semi-transparent grains the size of
Fig. 33.—Large (a) and small (b) hooks of pork-measle tapeworm

(Tænia solium). × 280. (After Leuckart.)
a grain of barley, or even larger. Unfortunately, in an animal so

difficult to handle as the pig, this visual examination is decidedly
troublesome, and is usually replaced by palpation. In many instances
the disease does not attract attention during the patient’s life, and is
only discovered on slaughter in consequence of the lesions by which
it is characterised.
Diagnosis. As the characteristic lesions of cysticercus disease are
to be found in the depths of the muscular and connective tissues, and
as the external symptoms may be regarded as of doubtful
significance, the diagnosis can only be confirmed during life by
manual examination of the tongue. This examination of the tongue
has been practised since the earliest times. Aristophanes even speaks
of it, and in the Middle Ages it was performed under sworn
guarantees. The regulations concerning the inspection of meat have
finally led to the suppression of this calling.
In this method of examining the tongue, the operator commences
by throwing the animal on its side, usually on the right side, and
holding it in this position by placing his left knee on its neck. He then
Fig. 34.—Mature sexual segments of pork-measle tapeworm
(Tænia solium), showing the divided ovary on the pore side. cp,
Cirrus pouch; gp, genital pore; n, nerve; ov, ovary; t, testicles; tc,
transverse canal; ut, uterus; v, vagina; vc, ventral canal; vd, vas
deferens; vg, vitellogene gland. × 10. (After Leuckart.)
passes a thick stick between the jaws and behind the tusks, opens the
mouth obliquely, raising the upper jaw by manipulating the stick.
Finally he fixes one end of this last by placing his foot upon it, and
holds the other extremity by slipping it under his left arm. In this
position he is able to grasp the free end of the tongue and by digital
palpation to examine the tongue itself, the gums, the free portions of
the frænum linguæ, etc.
Fig. 35.—Gravid segment of pork-measle tapeworm (Tænia solium),
showing the lateral branches of the uterus enlarged. (Stiles, Report U.S.A.
If he discovers cysts, the diagnosis is confirmed, but failure to do

so by no means disposes of the possibility of infection. Railliet
declares that about one animal in four or five shows no cysts beneath
the tongue, and, moreover, fraud is possible in this connection, it
being quite possible to prick the little cysts with a needle so that the
liquid contents escape, and examination gives no positive result. For
these reasons intra-vitam examination alone is now discounted, and
the chief reliance is placed on post-mortem search.
Prognosis. The prognosis is very grave, not on account of danger
to the lives of the infected, but because infected meat may be offered
for human consumption. Should such meat, in an insufficiently
cooked condition, be eaten by man, its ingestion is followed by the
development of Tænia solium. If cooking were always perfect it
would destroy the cysticerci, but the uncertainty in this respect
should prevent such meat being consumed. The cysticerci are killed
at a temperature of 125° to 130° Fahr.
Fig. 36.—Eggs of pork-measle tapeworm (Tænia solium): a, with

primitive vitelline membrane; b, without primitive vitelline
membrane, but with striated embryophore. × 450. (After Leuckart.)
Lesions. The lesions are represented by cysts alone—i.e., by semi-

transparent bladders, each of which contains a scolex or head armed
with four suckers and a double crown of hooks. The little bladders
are most commonly found in the muscles, lodged in the
interfascicular tissue, which they slightly irritate.
The number present varies extremely, depending on the intensity
of infestation and the number of eggs swallowed. Whilst in some
cases difficult to discover, in others they are so numerous that the
tissues appear strewn with them.
They are commonest in the muscles of the tongue, neck, and
shoulders, in the intercostal and psoas muscles, and in those of the
quarter.
The viscera—viz., the liver, kidneys, heart, lungs, etc.—are less
commonly infested, and in these organs the cysts degenerate very
rapidly. In animals which have been infested for a long time, the
cysts may even have undergone caseo-calcareous degeneration, the
liquid being absorbed and the lesions presenting the appearance of
little oblong firm nodules.
On cutting through masses of muscle the
vesicles protrude from between the bundles.
In young animals, infestation with
cysticerci causes wasting and ill-health;
subsequently the patients improve in
appearance, later on fatten, and gain
marketable condition.
Of the carcases examined in Prussian
slaughter-houses between 1876–82, one in
every 305 was found infested; between
1885–93, one in every 537.
Treatment. There is no curative
treatment. Only preventive measures are of
value. These are confined to rendering it
impossible for animals to ingest eggs of the
Tænia solium.
Cysticercus disease is rare in the north,
centre, and east of France, and in districts
where animals are reared in confinement. It
is commoner where pigs are at liberty, such
as Limousin, Auvergne, and Perigord. It is
frequent in North Germany, where the Fig. 37.—Half of hog,
custom of eating half-cooked meat showing the portions
contributes to the propagation of Tænia most likely to
solium. It is also frequent it Italy. become infested with
pork measles. (After
Ostertag.)
Fig. 38.—Cysticercus cellulosæ in pork. c,
Cysts; v, fibrous tissue capsule which forms
around the cyst.
BEEF MEASLES.
Causation. The disease of beef measles is due to the penetration

into the connective and muscular tissues of embryos of the Tænia
saginata, or unarmed tænia of man.
This disease, unlike that of the pig, has only been recognised
within comparatively recent times, and only after Weisse’s
experiments (St. Petersburg, 1841) on feeding with raw flesh was
attention drawn to it, although as early as 1782 the Tænia saginata
had been described by Goëze.
Measles in the ox is rarely seen in France, but is common in North
and East Africa. Alix has found it in Tunis, Dupuys and Monod in
Senegal, and it is common in the south of Algeria. The disease is due
simply to oxen swallowing eggs or embryos of the unarmed tænia, a
fact which explains the frequency of the disease in places where the
inhabitants are of nomad habits, and consequently disregard the
most elementary rules of public and general hygiene.
Fig. 39.—Anatomy of the Cysticercus cellulosæ (after Robin). A,

Cyst; B, scolex with hooks; C, hooks; D, magnified fragment of
cyst.
Furthermore, cattle in the Sahara, in Senegal and in the Indies,

have a very marked habit of eating ordure, and as no attempts are
made to prevent it, the risk to these animals is greatly increased.
As in the pig, the embryos which reach the stomach and intestine
penetrate into the circulatory system, and are thereby distributed
throughout the entire organism.
The development
of the cysticercus is
complete in forty
days, and if
swallowed by man in
infected meat after
this period it again
gives rise to the
Tænia saginata.
The age of the
animals seems of
less importance than
in the case of the pig,
for Ostertag and
Morot have seen
cases of beef measles
in animals of ten
years old.
Symptoms. The
symptoms are still
less marked than in
Fig. 40.—Section of a beef tongue heavily the pig, and in
infested with beef measles, natural size ordinary cases of
(Stiles, Annual Report U.S.A. Bureau of infection always
Agriculture, 1901). escape observation.
Stiles, however, gives
the following
account of a case experimentally infected:—
Fig. 41.—Several portions of an adult beef-measle tapeworm (Tænia saginata)
from man, showing the head on the anterior end and the gradual increase in size of
the segments, natural size. (Stiles, Annual Report U.S.A. Bureau of Agriculture,
1901.)
“Symptoms. Four days after feeding segments of T. saginata to a

healthy three-months-old calf, the patient showed a higher
temperature (the normal temperature was 39·2° C.). The calf ate but
little on that day, showed an accelerated pulse, swollen belly, staring
coat, and upon pressure on the sides showed signs of pain. The next
day the animal was more lively, ate a little, and for nine days later did
not show any special symptoms except pain on pressure of the
abdominal walls, and a slight fever. Nine days after the infection the
temperature was 40·7° C., pulse 86, respiration 22; the calf laid
down most of the time, lost its appetite almost entirely, and groaned
considerably. When driven it showed a stiff gait and evident pain in
the side. The fever increased gradually, and with it the feebleness
and low-spiritedness of the calf, which now retained a recumbent
position most of the time, being scarcely able to rise without aid, and
eating only mash with ground corn. Diarrhœa commenced, the
temperature fell gradually, and on the twenty-third day the animal
died. The temperature had fallen to 38·2° C. During the last few days
the calf was unable to rise; in fact, it could scarcely raise its head to
lick the mash placed before it. Pulse was reduced by ten beats. On the
last day the heart-beats were very much slower, yet firm, and could
be plainly felt. Several days before death the breathing was laboured,
and on the last day there was extreme dyspnœa.”
Diagnosis. In forming a diagnosis we meet with the same
difficulty as in the case of the pig. It is always easy to examine the
tongue; but when visible
lesions are absent diagnosis
in the case of the ox remains
doubtful and problematical
even more than in the pig.
In the carcase, diagnosis
is much easier. The cysts are
sought for, as in the pig, by
making sections of muscle,
those usually selected being
the pterygoid, cervical,
cardiac, and psoas muscles,
and those of the quarters.
Prognosis. The
prognosis is grave, not
indeed for the infected
animals, which seem little
injured by the parasite, but
for human beings, who run
the risk of contracting
Tænia inermis by eating
Fig. 42.—Apex, dorsal, and lateral insufficiently-cooked meat.
views of the head of beef-measle A temperature of 115° to
tapeworm (Tænia saginata), showing 120° Fahr. destroys the
a depression in the centre of the apex. cysticerci, but in roast meats
× 17. (Stiles, Report U.S.A. Bureau of the central temperature of
Agriculture, 1901.) the mass always remains
below this figure.
Salting for fifteen to
twenty days destroys the vitality of the parasite.
Lesions. The lesions are confined to the presence of the cyst and
of two little zones of chronic inflammation immediately surrounding
it. Unless heavily infested the subjects fatten just as well as others.
The vesicles are semi-transparent, ³⁄₁₆ inch to ¼ inch in length,
slightly ovoid in form, and contain a tænia head with four suckers,
but without hooks.
In seven to eight months the cysts undergo degeneration, the
liquid is absorbed, and calcium salts are deposited throughout the
mass. The lesions which remain have, in the ox, the appearance of
interstitial disseminated tuberculosis.
There is no curative treatment. The infested animal recovers
spontaneously with the lapse of time, for the cysticerci undergo
degenerative processes, but the flesh of such animals is of little
commercial value.
From a preventive standpoint we can only hope to improve
matters by a gradual and progressive change in social and public
hygienic conditions.
Fig. 43.—Sexually mature segment of beef-measle tapeworm (Tænia
saginata). c.p., Cirrus pouch with cirrhus; d.c., dorsal canal; g.p., genital
pore; n., lateral longitudinal nerves; ov., ovary; sg., shell gland; t.,
testicles; ut., median uterine stem, enlarged (in part after Leuckart); v.,
vagina; v.c., ventral canal, connected by transverse canal; tc., vd., vas
deferens; vg., vitellogene gland.
When the life of the nomad shall have been entirely replaced by
that of the highly-civilised European and private hygienic
precautions have rendered it impossible for animals to obtain access
to segments or eggs of the Tænia saginata, beef measles will
disappear.
At present, in the countries where the disease is common, one
experiences a feeling of astonishment that it is not far more frequent;
for experiment has shown that a person infected with one unarmed
tapeworm expels with the fæces an average of four hundred
proglottides per month, each proglottis or segment of the worm
containing about 30,000 eggs, each of which is capable of developing
into a tapeworm.
Beef measles is rather common in Germany, but rare in France,
Switzerland, and Italy.
TRICHINIASIS—TRICHINOSIS.
Trichinosis is a disease caused by the entrance into the body of the

Trichina spiralis. This parasite is swallowed in the larval form, and
undergoes sexual changes in the intestine, at first producing
intestinal trichinosis, which represents the first phase in the
development of the disease.
The trichinæ breed rapidly. The embryos penetrate into or are
directly deposited in the blood-vessels, which convey them to all
parts of the body, thus setting up the second phase of the disease,
known as muscular trichinosis.
Trichinosis as a disease has long been
recognised. Peacock in 1828 and J. Hilton
in 1832 mentioned the existence of the
cysts of trichinæ; Owen in 1835 gave the
name of Trichina spiralis to the parasites
contained in the cysts. Trichinosis being
common in Germany at that time, Virchow
and Leuckart undertook its investigation,
but mistook other nematodes of the
intestine for the Trichina spiralis. In 1847
Leydy recognised that trichinosis occurred
in American pigs.
In 1860 Zenker found muscular and
intestinal trichinosis on post-mortem
examination of a girl who had been
suspected of suffering from typhoid fever,
and a carefully conducted inquiry revealed
the fact that this girl had some time
previously eaten a quantity of raw ham.
Virchow and Leuckart returned to their
Fig. 44.—Gravid investigations, and the life history of the
segment of beef-measle parasite soon became definitely known.
tapeworm (Tænia Causation. Trichinosis is capable of
saginata), showing attacking all mammifers without
lateral branches of the exception, from a man to a mouse; and
uterus, enlarged. most animals which can be made the
(Stiles, Annual Report subjects of experiment contract the disease
U.S.A. Bureau of in varying degrees.
Agriculture, 1901.) The intestinal form is seen in birds, but
Fig. 45.—Egg of beef-measle tapeworm (Tænia saginata), with thick

egg-shell (embryophore), containing the six-hooked embryo
(oncosphere), enlarged. (After Leuckart.)
the muscles do not become infested by the embryos.

Cold-blooded animals are proof against the disease.
After the ingestion of meat containing cysts of the parasite, the
processes of gastric and intestinal digestion set the larvæ at liberty.
These larvæ become sexual at the end of four to five days, and the
females, which are usually twice as numerous as the males, begin
laying eggs from the sixth day, continuing for a month to six weeks.
Each female lays approximately from 10,000 to 15,000 eggs. The
embryos perforate the intestinal walls,
pass into the circulation, and are hurried
into all parts of the system. This period of
infestation constitutes the first phase of
the disease.
Askanazy, in 1896, suggested that it was
not the embryos which perforated the
intestinal walls and thus reached the
blood-vessels, but the fertilised female
trichinæ themselves, which entered the
terminal chyle vessels and laid their eggs
directly within them.
This observation is of great interest, for
it contradicts the view held by Leuckart
and proves that treatment is useless even
in the first phase.
The males are about ¹⁄₁₆ inch in length,
the females ⅛ inch to ⁵⁄₃₂ inch, and are
ovoviviparous.
Symptoms. The symptoms lack
precise character, even when the disease is
known to be developing, and moreover Fig. 46.—Male trichina
they have only been carefully observed in from the intestine.
experimental cases. As soon as the laying (Colin.)
period begins, signs of intestinal
disturbance may be observed, possibly due to embryos perforating
the intestinal walls (if we accept Leuckart’s view), or, according to
Askanazy, to adult females penetrating the chyle vessels and
disturbing intestinal absorption.
These symptoms are only appreciable in cases of “massive”
infestation. If slight, the disturbance passes unperceived. In severe
cases the symptoms consist of diarrhœa, loss of appetite, grinding of
the teeth, abdominal pain in the form of dull colic, and sometimes
irritation of the peritoneum. The embryos carried by the circulation
then escape into the tissues and, like the cysticerci, become encysted,
preferably in the muscles, in the interfascicular connective tissue
towards the ends of the bundles. Each (asexual) parasite plays the
part of a foreign body, causing infiltration of serum and exudation of
leucocytes in its neighbourhood, and soon becoming encysted in the
interior of a little ovoid space surrounded by a fibro-fatty wall. Fat
granules accumulate at each end of the cyst.
Fig. 47.—Free larval trichina. (Colin.)

Fig. 48.—Trichinæ
encysted in the muscular
tissue. (Colin.)

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JEFF MADURA • HARDEEP SINGH GILL

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Expenses.......................................................................... 58 Capital Gains and Losses................................................... 93

Chapter 4 Part 1: Brad MacDonald—

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Banking Services Offered Consumer Credit Products.................................. 164

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Financial Planning Online Exercises................................ 196

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Mini-Case 1: Auto Insurance........................................... 256

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Open-End versus Closed-End Funds............................... 380 Employer-Sponsored Retirement Plans................. 411

Common Types of Wills...................................... 443

Chapter 14 Probate Fees and Taxes at Death......................... 448

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Trusts............................................................................. 451 Appendix A Projects............................ 477

Integrating the Components................................ 466 Criteria Used to Assess Applicants................... 488

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New to the Fourth Canadian Edition

Revised Chapter Introduction Cases

Free Apps for Personal Finance

Psychology of Personal Finance

End-of-Chapter Challenge Questions

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More Visual Exhibits

Improved Ethical Dilemmas

Key Chapter Updates

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TRIED AND TRUE LEARNING TOOLS IN THE FOURTH

Financial Planning Problems

End-of-Chapter Study Guide

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Build Your Own Financial Plan

Financial Planning Weblinks

Financial Planning Online Exercises

Build a Financial Plan for the Sampson family

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Appendix B: Your Career

HALLMARKS OF PERSONAL FINANCE,

Textbook Content and Organization

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Key Topics in the Fourth Canadian Edition

Focus on Opportunity Costs

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INSTRUCTOR AND STUDENT SUPPORT PACKAGE

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THE LEARNING OBJECTIVES OF THIS CHAPTER ARE TO:

L.O.1 HOW YOU BENEFIT FROM AN UNDERSTANDING

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