As the next step in reviewing their finances, the Sampsons are assessing their insurance needs related to their vehicles and home. They indicated the amount of money they spend on insurance on their personal balance sheet in Chapter 2. They currently have auto insurance on their two cars. Each insurance policy has a $1,000 deductible and specifies limits of 100/200/20 ($100,000 per person injured in an accident, $200,000 for all people combined, and $20,000 to cover other damage to the car or to other property). Dave and Sharon live in a no-fault state. Their homeowner’s insurance covers the market value of their home and has a deductible of $10,000. Their policy does not cover floods, which periodically occur in their area. Their house has never been flooded, though, so Dave and Sharon are not concerned. Go to the worksheets at the end of this chapter to continue this case. As the next step in reviewing their finances, the Sampsons are assessing their insurance needs related to their vehicles and home. They indicated the amount of money they spend on insurance on their personal balance sheet in Chapter 2. They currently have auto insurance on their two cars. Each insurance policy has a $1,000 deductible and specifies limits of 100/200/20 ($100,000 per person injured in an accident, $200,000 for all people combined, and $20,000 to cover other damage to the car or to other property). Dave and Sharon live in a no-fault state. Their homeowner’s insurance covers the market value of their home and has a deductible of $10,000. Their policy does not cover floods, which periodically occur in their area. Their house has never been flooded, though, so Dave and Sharon are not concerned. Go to the worksheets at the end of this chapter to continue this case. Advise the Sampsons regarding their car insurance. Do they have enough insurance? Do they have too much insurance? How might they be able to reduce their premium?
> Fritz and Helga work for a local manufacturing company. Since their marriage five years ago they have been working extensive overtime, including Sundays and holidays. Fritz and Helga have established a lifestyle based on their overtime earnings. Recently
> John and Cheryl just borrowed $30,000 on a home equity line of credit. The interest rate for the loan is 6.75% for the entire year, and they took out the loan on May 1. John and Cheryl are in the 28% tax bracket. What will be their tax savings for the fi
> Bill wants to purchase a new car for $45,000. Bill has no savings, so he needs to finance the entire purchase amount. With no down payment, the interest rate on the loan is 13%, and the maturity of the loan is six years. His monthly payments will be $903
> Refer to question 5. If Sharon had been able to afford the four-year loan, how much interest would she have saved compared to the five-year loan? Data from Question 5: Sharon is considering the purchase of a car. After making the down payment, she will
> Sharon is considering the purchase of a car. After making the down payment, she will finance $15,500. Sharon is offered three maturities. On a four-year loan, Sharon will pay $371.17 per month. On a five-year loan, Sharon’s monthly payments will be $306.
> If Beth had taken the same loan as an add-on interest loan, how would her payments differ? Why is there a difference?
> Eileen is a college student who consistently uses her credit card as a source of funds. She has maxed out her credit card at the $6,000 limit. Eileen does not plan on increasing her credit card balance any further, but has already been declined for a car
> Jarrod has narrowed his choice to two credit cards that may meet his needs. Card A has an APR of 21%. Card B has an APR of 14% but also charges a $25 annual fee. Jarrod will not pay off his balance each month, but will carry a balance forward of about $4
> What is variable life insurance? What are the advantages and disadvantages of variable life policies? How can individuals avoid the high fees of variable life insurance?
> You just borrowed $7,500 and are charged a simple interest rate of 8%. How much interest do you pay each year?
> What information will you need to supply when applying for credit? What kinds of attributes are creditors looking for? Do you need to have all these attributes to get credit?
> The Sampsons have been carrying a balance of about $2,000 on their credit card. They have been paying the minimum amount due and have been using any excess net cash flows to implement their new savings plan for a new car and their children’s college educ
> The Sampsons have been carrying a balance of about $2,000 on their credit card. They have been paying the minimum amount due and have been using any excess net cash flows to implement their new savings plan for a new car and their children’s college educ
> What are payday loans? Why should you avoid payday loans as a source of funds?
> What type of information is contained in the Buyers Guide?
> Explain the advantages and disadvantages of buying a new car instead of a used car.
> What is peer-to-peer lending? What are the advantages of a peer-to-peer loan?
> Why may a weak economy cause the limit on your home equity line of credit to decline? Why may a strong economy cause the limit on your home equity line of credit to rise?
> How are interest rates calculated for the two types of home equity loans? Why do borrowers prefer home equity loans to other loans?
> What is universal life insurance? How does it differ from term life and whole life?
> Discuss the two ways financial institutions might define equity to set credit limits. What happens if you default on a home equity loan?
> What is home equity? Describe how home equity loans work.
> Who extends student loans? What are the characteristics of student loans?
> What are the advantages and disadvantages of leasing a car? Give some advice for someone considering leasing.
> Describe some techniques that car salespeople might use in negotiating the price of the car. What should you be aware of at “nohaggle” dealerships?
> Why is purchasing a new car online not as efficient as buying a new car at a dealership?
> List the steps in buying a car. What financial criteria should be considered? Discuss each briefly.
> Why are loan payments under the simple interest method usually lower than loan payments under the add-on interest method?
> What is simple interest? What information is needed to compute it? What information is contained in a loan repayment schedule?
> What is the purpose of the annual percentage rate measurement? Could lenders with the same interest rates report different APRs?
> Why is the premium paid for whole life higher than the premium for term life? What alternative approach to purchasing life insurance might provide the same benefits as whole life?
> What are your responsibilities if you cosign a loan? What are the potential consequences of failing to live up to your responsibilities as a cosigner?
> Explain the difference between a 10% rate charged on a payday loan and a 10% rate charged by a bank on a personal loan.
> Explain how collateral works. Do all loans have collateral? What is the relationship between collateral and interest rates?
> What information is included in a loan contract? How is the amount of the loan determined?
> What information must borrowers supply to lenders in the loan application process? Why is this information important to lenders?
> What does it mean if a loan is amortized? What do the loan payments represent?
> List some possible sources of personal loans. What precautions should be taken with loans from family members or friends?
> What are some viable alternatives to payday loans?
> Noel has a 15% marginal tax rate. If he pays $1,400 in interest on a home equity loan in the first year, what are his tax savings?
> Refer to question 8. What will Mary and Marty’s credit limit be if the bank uses the market value of equity to determine their credit limit and will loan 70% of the equity? Data from Question 8: Mary and Marty are interested in obtaining a home equity
> Describe the nonforfeiture and loan clauses of whole life insurance policies.
> Mary and Marty are interested in obtaining a home equity line of credit. They purchased their house five years ago for $125,000, and it now has a market value of $156,000. Originally, Mary and Marty paid $25,000 down on the house and took out a $100,000
> Tracy is borrowing $8,000 on a six-year, 11%, add-on interest loan. What will Tracy’s monthly payments be?
> Susan recently quit working for a local firm and has yet to find a new job. She knows she can maintain her health insurance from her old employer due to COBRA. How much will it likely cost her for health insurance if she previously paid $100 per month an
> Christine’s total monthly expenses typically amount to $1,800. About $50 of these expenses are work related. Christine’s employer provides disability insurance coverage of $500 per month. How much individual disability insurance should Christine purchase
> Pete’s health insurance policy specifies that he should pay 30% of expenses associated with a long-term illness, and he has a stop loss provision of $35,000 in his policy. If Pete incurs expenses of $70,000, how much would he owe?
> A PPO uses a discount on charge arrangement. Marie incurred total charges by a hospital of $20,000, and the percentage paid to the provider is 70%. Marie’s contract with the PPO specifies her copay as 20%. How much does Marie have to pay?
> When the Sampsons purchased a home, they obtained a 30-year mortgage with a fixed interest rate of 8.6%. Their monthly mortgage payment (excluding property taxes and insurance) is about $700 per month. Today, they could obtain a 30-year mortgage with an
> As the next step in reviewing their finances, the Sampsons are assessing their insurance needs related to their vehicles and home. They indicated the amount of money they spend on insurance on their personal balance sheet in Chapter 2. They currently ha
> What do the terms round lot and odd lot mean in stock transactions?
> What is whole life insurance? What benefit does it provide that term life insurance does not?
> Why should young people have investments in stocks as part of their portfolio?
> What factors should you consider when selecting which stockbroker to use?
> When performing an economic analysis of stocks, what economic factors are most closely watched?
> What is a balloon payment mortgage? When is this type of mortgage useful?
> What is an escrow account? How do escrow accounts help protect the lender?
> What is an FHA loan? How does the FHA or VA help lower-income individuals buy homes?
> What is a home inspection? Why is it important for you to have a home inspected before purchase?
> What is a Qualified Mortgage?
> What are some of the risks associated with buying a home?
> What is private mortgage insurance? How does it impact the cost of your mortgage?
> Briefly describe some of the term insurance options
> Explain how a weak economy affects the values of homes.
> What is mortgage refinancing? Are there any disadvantages to refinancing?
> Describe the features of graduated payment and balloon payment mortgages.
> Describe some of the costs of buying a home. Are there potential tax savings associated with buying a home?
> What are the costs of renting a home?
> Discuss the characteristics of an adjustable-rate mortgage. What influences your choice of a fixed- or adjustable-rate mortgage?
> List the three things that determine the amount of the monthly mortgage payment. Explain how each affects the payment.
> Describe the characteristics of a fixed-rate mortgage. Why do certain homeowners prefer a fixed-rate mortgage to an adjustable-rate mortgage?
> What are closing costs? List and briefly describe the different closing costs you might incur when applying for a mortgage.
> How do lenders protect their interest in a home? Describe two governmentbacked home loan programs.
> What is term insurance? What factors determine the premium for term insurance? What is decreasing-term insurance?
> Why does the value of a home depend on the demand for homes? What factors influence the demand for homes?
> Once you have reduced your list of three or four homes down to one home, what is your next step? Should you offer the price the seller is asking? Describe how you would conduct a market analysis of the home.
> What is the main factor in determining a home’s resale value? How can you predict a home’s resale value? Who pays commissions when a home is sold?
> Why do insurance costs and taxes vary among homes?
> How do price, convenience of the location, and maintenance affect your home buying decisions?
> What should you consider when determining an affordable down payment and monthly mortgage payments?
> What is your first task when considering buying a home? Why is this step important? How can a real estate broker help you?
> Dave and Sharon Sampson are assessing the amount of health insurance and disability income insurance they have. The Sampsons’ health insurance is provided by a health maintenance organization (HMO). Recently, Dave and Sharon have heard about preferred p
> Dave and Sharon Sampson are assessing the amount of health insurance and disability income insurance they have. The Sampsons’ health insurance is provided by a health maintenance organization (HMO). Recently, Dave and Sharon have heard about preferred p
> Dave and Sharon Sampson are assessing the amount of health insurance and disability income insurance they have. The Sampsons’ health insurance is provided by a health maintenance organization (HMO). Recently, Dave and Sharon have heard about preferred p
> The Sampsons have one remaining insurance need: life insurance. They have decided to purchase term life insurance. They want a life insurance policy that will provide for the family in the event of Dave’s death because he is the major b
> What is the purpose of disability income insurance? Why might younger individuals consider purchasing disability insurance?
> What is Medigap insurance?
> What is a high deductible health plan? How is this type of plan related to an HSA?
> Vera is an 85yearold widow and retiree from a large corporation. Her former employer recently changed the health care coverage for retirees to an HMO. Vera is having difficulty with her knees and has requested a referral to an orthopedist. After orderi
> Morris will start investing $1,500 a year in stocks. He feels he can average a 12% return. If he follows this plan, how much will he accumulate in 5 years? In 10 years? In 20 years?
> Floyd wants to invest the $15,000 he received from his grandfather’s estate. He wants to use the money to finance his education when he pursues his doctorate in five years. What amount will he have in five years if he earns a 9% return? If he receives a
> Dawn decides to invest $2,000 each year in stock at the end of each of the next five years. She believes she can earn a 9% return over that time period. How much will Dawn’s investment be worth at the end of five years?
> Tammy has $3,500 that she wants to invest in stock. She believes she can earn a 12% annual return. What would be the value of Tammy’s investment in 10 years if she is able to achieve her goal?
> Emma bought a stock a year ago for $53 per share. She received no dividends on the stock and sold the stock today for $38 per share. What is Emma’s return on the stock?
> Joel (from Problem 1) is in the 25% tax bracket. What amount of taxes will he pay on his capital gain if he held the stock for less than a year? Data from Problem 1: Joel purchased 100 shares of stock for $20 per share. During the year, he received di
> Recall that the Sampsons have a goal of saving about $300 per month ($3,600 per year) for their children’s college education. They want to estimate how this money would grow over time if they invest it in stock. Dave and Sharon have nev
> List the information provided in corporate bond quotations.
> Wes acquired a mineral interest during the year for $10 million. A geological survey estimated that 250,000 tons of the mineral remained in the deposit. During the year, 80,000 tons were mined, and 45,000 tons were sold for $12 million. Other related exp
> Ella has $105,000 of losses from a real estate rental activity in which she actively participates. She has other rent income of $25,000 and other passive income of $32,000. Her AGI before considering these items of income and loss is $95,000. How much r
> On June 5, 2014, Dan purchased and placed in service a 7-year class asset costing $550,000. Determine the maximum deductions that Dan can claim with respect to this asset in 2014 and 2015.
