Most home insurance policies cover jewelry for $1,000 and silverware for $2,500 unless items are covered with additional insurance. If $4,500 worth of jewelry and $6,000 worth of silverware were stolen from a family, what amount of the claim would not be covered by insurance?
> Shelly’s variable annuity has a mortality and expense risk charge at an annual rate of 1.25 percent of account value. Her account value during the year is $50,000. What was Shelly’s mortality and expense risk charge for the year?
> A class-action suit against a utility company resulted in a settlement of $1.4 million for 62,000 customers. If the legal fees, which must be paid from the settlement, are $300,000, what amount will each plaintiff receive?
> Based on the following, calculate the costs of buying versus leasing a motor vehicle. (LO 6.2) Purchase Costs Down payment: $1,500 Loan payment: $450 for 48 months Estimated value at end of loan: $4,000 Opportunity cost interest rate: 4 perc
> Based on the data provided here, calculate the items requested: (LO 6.2) Annual depreciation, $2,500 Annual mileage, 13,200 Current year’s loan interest, $650 Miles per gallon, 24 Insurance, $680 License and registration fees, $65 Average gasoli
> Based on the following data, prepare a financial comparison of buying and leasing a motor vehicle with a $24,000 cash price: Down payment (to finance vehicle), $4,000 Monthly loan payment, $560 Length of loan, 48 months Value of vehicle at
> Based on financial and opportunity costs, which of the following do you believe would be the wiser purchase? Vehicle 1: A three-year-old car with 45,000 miles, costing $16,700 and requiring $1,385 of immediate repairs. Vehicle 2: A five-year-old car wit
> If a person saves $62 a month by using coupons and doing comparison shopping, (a) what is the amount for a year? (b) What would be the future value of this annual amount over 10 years, assuming an interest rate of 4 percent?
> When using the research-based approach for purchasing described in this chapter, which actions do you believe are overlooked by most shoppers?
> What would be the net present value of a microwave oven that costs $159 and will save you $68 a year in time and food away from home? Assume an average return on your savings of 4 percent for five years. (Hint: Calculate the present value of the annual s
> A work-at-home opportunity is available in which you will receive 3 percent of the sales for customers you refer to the company. The cost of your “franchise fee” is $600. How much would your customers have to buy to cover the cost of this fee?
> A service contract for a video projection system costs $70 a year. You expect to use the system for five years. Instead of buying the service contract, what would be the future value of these annual amounts after five years if you earn 3 percent on your
> Calculate the unit price of each of the following items: a. Motor oil—2.5 quarts for $1.95 (cents/quart) b. Cereal—15 ounces for $2.17 (cents/ounce) c. Canned fruit—13 ounces for 89 cents (cents/ounce) d. Facial tissue—300 tissues for $2.25 (cents/100 ti
> John Walters is comparing the cost of credit to the cash price of an item. If John makes an $80 down payment and pays $35 a month for 24 months, how much more will that amount be than the cash price of $685?
> An online buying club offers a membership for $300, for which you will receive a 10 percent discount on all brand-name items you purchase. How much would you have to buy to cover the cost of the membership?
> In the preceding example, assuming their insurance rates remain the same, how many years will it take Dave and Ellen to earn back in discounts the cost of the deadbolts? The cost of the smoke detectors? Would you recommend Dave and Ellen invest in the sa
> Five years ago, you purchased a $1,000 corporate bond issued by General Electric. The interest rate for the bond was 4 percent. Today comparable bonds are paying 5 percent. a. What is the approximate dollar price for which you could sell your General
> Assume you are 45 years old, want to retire in 20 years, and currently have an investment portfolio valued at $240,000 invested in technology stocks. After talking with a financial advisor, you feel you have “too many eggs in one basket” and need to div
> In 1994, you purchased a $1,000 corporate bond issued by Boeing. At the time, the interest rate for the bond was 6 percent. Today, comparable bonds are paying 4.30 percent. a. What is the approximate dollar price for which you could sell your Boeing b
> What is the relationship between health insurance coverage and other aspects of financial planning?
> Based on Exhibit 7–9 , if you were buying a home, what would be the approximate total closing costs (excluding the down payment)? As an alternative, obtain actual figures for the closing items by contacting various real estate organizations or by doing o
> In an attempt to have funds for a down payment in five years, James Dupont plans to save $3,800 a year for the next five years. With an interest rate of 4 percent, what amount will James have available for a down payment after the five years?
> Kelly and Tim Jarowski plan to refinance their mortgage to obtain a lower interest rate. They will reduce their mortgage payments by $56 a month. Their closing costs for refinancing will be $1,670. How long will it take them to cover the cost of refinanc
> If an adjustable-rate 30-year mortgage for $120,000 starts at 4.0 percent and increases to 5.5 percent, what is the amount of increase of the monthly payment?
> Which mortgage would result in higher total payments? (LO 7.3) Mortgage A: $985 a month for 30 years Mortgage B: $780 a month for 5 years and $1,056 for 25 years
> Based on Exhibit 7–7, what would be the monthly mortgage payments for each of the following situations? a. A $160,000,15-year loan at 6.5 percent. b. A $215,000, 30-year loan at 5 percent. c. A $190,000, 20-year loan at 6 percent.
> Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation Monthly gross income, $2,950 Down payment to be made—15 percent of purchase price Other debt (monthl
> Ben and Carla Covington plan to buy a condominium. They will obtain a $220,000, 30-year mortgage, at 5 percent. Their annual property taxes are expected to be $1,800. Property insurance is $480 a year, and the condo association fee is $220 a month. Based
> Condominiums usually require a monthly fee for various services. At $235 a month, how much would a homeowner pay over a 10-year period for living in this housing facility?
> Many locations require that renters be paid interest on their security deposits. If you have a security deposit of $1,800, how much would you expect a year at 3 percent?
> What do you consider to be an “ethical” health care system? Explain your answer.
> When renting, various move-in costs will be encountered. Estimate the following amounts: First month rent $ _______________ Security deposit $ _______________ Security deposit for utilities (if applicable) $ _______________ Moving truck, oth
> Based on the following data, would you recommend buying or renting? / Assume an after-tax savings interest rate of 6 percent and a tax rate of 28 percent.
> Use Exhibit 10-1 to find the average number of additional years a 25-year-old male and female were expected to live, based on the statistics gathered by the U.S. government as of 2009.
> Obtain premium rates for $50,000 whole life, universal life, and term life policies from local insurance agents. Compare the cost and provisions of these policies.
> Shaan and Anita are married and have two children, ages 4 and 7. Anita is a “nonworking” spouse who devotes all of her time to household activities. Estimate how much life insurance Shaan and Anita should carry.
> You and your spouse are in good health and have reasonably secure careers. Each of you makes about $40,000 annually. You own a home with an $80,000 mortgage, and you owe $15,000 on car loans, $5,000 on personal debts, and $4,000 on credit card loans.
> Sophia purchased a variable annuity contract with a $25,000 purchase payment. Surrender charges being with 7 percent in the first year, and decline by 1 percent each year. In addition, Sophia can withdraw 10 percent of her contract value each year wit
> Using the "nonworking" spouse method, what should be the life insurance needs for a family whose youngest child is 5 years old?
> You are a wage earner in a “typical family,” with $40,000 gross annual income. Use the easy method to determine how much insurance you should carry.
> In 2005, Joelle spent $5,000 on her health care. If this amount increased by 6 percent per year, what would be the amount Joelle spent in 2015 for the same health care? (Hint: Use the Time Value of Money Table in the Chapter 1 Appendix, Exhibit 1-A)
> Pam is 31 and recently divorced, with children ages 3 and 6. She earns $40,000 a year as a secretary. Her employer provides her with basic health insurance coverage. She receives child support from the children’s father, but he misses payments often a
> Ronald Roth started his new job as Controller with Aerosystems today. Carol, the employee benefits clerk, has given Ronald a packet that contains information on the company’s health insurance options. Aerosystems offers its employees the choice between
> Ronald Roth started his new job as Controller with Aerosystems today. Carol, the employee benefits clerk, has given Ronald a packet that contains information on the company’s health insurance options. Aerosystems offers its employees the choice between
> Ronald Roth started his new job as Controller with Aerosystems today. Carol, the employee benefits clerk, has given Ronald a packet that contains information on the company’s health insurance options. Aerosystems offers its employees the choice between
> Georgia has a take-home pay of $600 a week. Her disability insurance coverage replaces 70 percent of her earnings after a four-week waiting period. What amount would she receive in disability benefits if an illness kept Georgia off work for 16 weeks?
> Becky’s comprehensive major medical health insurance plan at work has a deductible of $750. The policy pays 85 percent of any amount above the deductible. While on a hiking trip, she contracted a rare bacterial disease. Her medical costs for treatment, i
> As of 2012, per capita spending on health care in the United States was about $9,000. If this amount increased by 7 percent a year, what would be the amount of per capita spending for health care in 8 years?
> The Tucker family has health insurance coverage that pays 80 percent of out-of-hospital expenses after a $500 deductible per person. If one family member has doctor and prescription medication expenses of $1,100, what amount would the insurance pay?
> What amount would a person with actual cash value (ACV) coverage receive for two-year-old furniture destroyed by a fire? The furniture would cost $2,000 to replace today and had an estimated life of five years.
> You estimate that you can save $3,450 by selling your home yourself rather than using a real estate agent. What would be the future value of that amount if invested for five years at 3 percent?
> How does your age affect the type of investments you choose to obtain your financial goals?
> Calculate the current price for the following bonds.
> Explain what the following bond ratings mean for investors. Aaa BBB CC
> What type of information about bonds is available on the Internet?
> In your own words, describe why corporations sell corporate bonds.
> Calculate the annual interest and the semiannual interest payment for corporate bond issues with a face value of $1,000.
> List the three reasons investors purchase corporate bonds.
> What is the difference between a Treasury bill, a Treasury note, a Treasury bond, and TIPS?
> Explain the difference between a general obligation bond and a revenue bond.
> Using the formula presented in this section, calculate the taxable equivalent yields for the following tax-exempt bonds.
> What are the risks involved when investing in state and local securities?
> Visit the Social Security Administration’s Web page to determine your approximate monthly Social Security disability benefits should you become disabled in the current year. Or call your Social Security office to request the latest edition of Social Sec
> Why should you monitor the value of your investment?
> Why should investors be concerned with asset allocation and the time their investments have to work for them?
> Assume you must choose an investment that will help you obtain your investment goals. Rank the following investments from 1 (low) to 5 (high) and then justify your choice for your investment portfolio. Investment Rank Justification (1 = low; 5= hig
> In your own words, describe each of the four components of the risk factor.
> How do income, growth, and liquidity affect the choice of an investment?
> Why are safety and risk two sides of the same coin?
> What factors should you consider when performing a financial checkup?
> In your own words, describe the time value of money concept and how it affects your investment program.
> How can you obtain the money needed to begin investing?
> What is the difference between an immediate and a deferred annuity?
> Jamie Lee and Ross, happy newlyweds with a new home and twins on the way, are anxiously awaiting their new bundles of joy. Ross was a little nervous, and understandably so, as he quietly wondered if everything will go all right with Jamie’s pregnancy.
> What is an annuity?
> What are fixed and variable annuities?
> As a general rule, are annuities advisable for people in poor health? Why or why not?
> Match the following terms with the appropriate definition: Endowment a. A person named to receive the benefits from an insurance policy. Beneficiary b. Provides coverage for a specific period of time and pays an agreed- upon sum of money to the poli
> What are the various riders in a life insurance policy?
> What is a rider?
> What are the key provisions in a life insurance policy?
> What are the four most common settlement options?
> What factors do you consider in choosing an insurance agent?
> Define the following types of life insurance policies. a. Group life insurance b. Credit life insurance c. Endowment life insurance
> Newlyweds Jamie Lee and Ross have had several milestones in the past year. They are newlyweds, recently purchased their first home and now have twins on the way! Jamie Lee and Ross have to seriously consider their insurance needs. A family, a home and
> What are the two types of insurance companies?
> What are the four forms of whole life insurance?
> What are the five forms of term insurance?
> For each of the following statements, indicate your response by writing “T” or “F”. a. Stock life insurance companies generally sell participating (or par) policies. b. Mutual life insurance companies specialize in the sale of nonparticipating (nonpar)
> What is life insurance? What is its purpose?
> For each of the following statements, indicate your response by writing “T” or “F”. a. Life insurance is one of the least important and inexpensive purchases. b. A beneficiary is a person named to receive the benefits from the insurance policy c. Life i
> What are the four methods of determining life insurance needs?
> What are various groups doing to curb the high costs of health care?
> What are the reasons for rising health care expenditures?
> What can individuals do to reduce health care costs?
> 1. Using Your Personal Financial Plan Sheet 22, compare the advantages and the disadvantages of renting a home or apartment versus the purchase of a home. 2. Jamie Lee and Ross are estimating that they will be putting $40,000 from their savings as a down
> 1. Based on Mackenzie’s experiences, what benefits and drawbacks are associated with online car buying? 2. What additional actions might Mackenzie consider before buying a motor vehicle? 3. What actions might a car buyer take if a lemon is purchased?
> The company issued 10,000 shares of $1 par common stock for cash of $40 per share. Make the necessary journal entry.
> The manager is entitled to a bonus equal to 5% of her store’s earnings. The difficult part is that calculation of the store’s earnings includes a subtraction for the amount of the bonus. The store’s earnings before the bonus total $200,000. Calculate the
> The company has the following three loans payable scheduled to be repaid in February of next year. As of December 31 of this year, compute (1) Total current liabilities and (2) Total noncurrent liabilities. (a) The company intends to repay Loan A, for
> On January 1, the company purchased investment securities for $1,000. The securities are classified as trading. By December 31, the securities had a fair value of $1,800 but had not yet been sold. Excluding the trading securities, income before taxes for
