Question: When an investor sells a bond in

> 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 breadwinner. The Sa

> What are living benefits? When might a policyholder use this option?

> What is a beneficiary? Why is it important to periodically review your beneficiaries?

> What is an installment payments settlement? When would an insured individual choose this option?

> What is a lump-sum settlement? What kind of beneficiary would benefit the most from this option?

> What is mortgage life insurance? Is mortgage life insurance a good buy? Why or why not?

> Why is it important to evaluate the financial condition of a life insurance company?

> How do individuals benefit from having health insurance? Why has health insurance received a lot of attention recently?

> Recall that one of the Sampsons’ goals is to invest for their children’s future college education. To become more educated investors, they have been reviewing analyst and brokerage firm recommendations. Dave and Sharon are ready to invest in several stoc

> How are health insurance and disability insurance related to your wealth?

> How did the PPACA change the way insurance companies treat persons with preexisting conditions?

> What types of services are typically covered by vision insurance? Why should some individuals consider buying a separate vision insurance policy?

> What is a health savings account, or HSA? Why is this account often preferable to a flexible spending account?

> Briefly describe some of the significant features of the Affordable Care Act.

> Briefly describe some of the provisions of disability income insurance.

> Briefly describe some of the sources of disability income insurance.

> What are some other types of health insurance that might be offered by an employer?

> What is the purpose of long-term care insurance? What factors influence long-term care insurance premiums? What factors should be considered when purchasing long-term care insurance?

> What is Medicaid? How do individuals qualify for Medicaid?

> Recall that one of the Sampsons’ goals is to invest for their children’s future college education. To become more educated investors, they have been reviewing analyst and brokerage firm recommendations. Dave and Sharon are ready to invest in several stoc

> Briefly describe the provisions of the Medicare Prescription Act

> What is Medicare? Describe Parts A and B of Medicare.

> What is a flexible spending account? Why do some individuals allocate a minimal amount to this account?

> Briefly describe two federal regulations intended to ensure that individuals can maintain continuous health care coverage if their employment status changes

> Compare and contrast the discount on charge arrangement and the per diem arrangement associated with PPOs.

> What is a preferred provider organization (PPO)? How does it operate?

> What questions should you ask when considering an HMO or PPO?

> Describe how an HMO works. What are the advantages and disadvantages of this type of health care coverage?

> Compare and contrast private health care fee for service plans and managed health care plans.

> Who offers health insurance? Do employers offer health insurance?

> What is the purpose of life insurance? Do you think everyone needs life insurance? Explain.

> What should your first priority of investing be? What is the disadvantage of investments that satisfy that priority?

> What is private health insurance? Briefly describe some types of private health insurance coverage.

> Nancy’s employer provides her with two times her annual gross salary in life insurance. How much additional insurance should Nancy purchase based on the information in the previous problem?

> Nancy is a widow with two teenage children. Nancy’s gross income is $3,000 per month, and taxes take about 30% of her income. Using the income method, Nancy calculates she will need to purchase about eight times her disposable income in life insurance to

> What is a “cash value” homeowner’s policy? What is a “replacement cost” homeowner’s policy?

> Why is it important to keep a detailed inventory of your household possessions outside your home?

> How can you determine the financial strength of an insurance company? Why is this important to you as a consumer?

> What is a personal property floater? What is the difference between scheduled and unscheduled floaters?

> 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

> Denise and Kenny are ready to make an offer on an 1,800-square-foot home that is priced at $135,000. They investigate other homes on lots of similar size and find the following information: A 2,400-square-foot home sold for $168,000. A 1,500-square-foo

> Paul (from problem 11) will be able to save $400 per month (which can be used for mortgage payments) for the indefinite future. If Paul finances the remaining cost of the home (after making the $20,000 down payment) at a rate of 5% over 30 years, what ar

> What is a conversion option? What are the benefits of having this option?

> Doug and Lynn bought their home three years ago. They have a mortgage payment of $601.69. Interest rates have recently fallen, and they can lower their mortgage payments to $491.31 if they refinance. What would their annual savings be if they refinance?

> What is a bond? What is a bond’s par value? What are coupon payments, and how often are they normally paid? What happens when investors buy a bond below par value? When should you consider investing in bonds?

> What is interest rate risk? How does a rise in interest rates affect a bond’s price?

> What is the risk to investors on bonds that have a call feature?

> Discuss default risk as it relates to bonds. How may investors use risk ratings? What is the relationship between the risk rating and the risk premium? How do economic conditions affect default risk?

> Discuss the effect of taxes on bond returns.

> What are corporate bonds? Are corporate bonds subject to default risk? What are junk bonds? Why would investors purchase junk bonds?

> What are federal agency bonds? Compare and contrast the three most common federal agency bonds

> What are municipal bonds? Why are they issued? Are all municipal bonds free from default risk? What characteristic makes municipal bonds especially attractive to high-income investors?

> What are some factors that make estimating life insurance needs difficult?

> What are Treasury bonds? Describe their key characteristics.

> Discuss how bonds are sold on the secondary market.

> What is a bond’s yield to maturity? How does the price paid for a bond affect its yield to maturity?

> What is a convertible bond? How does a bond’s convertibility feature affect its return?

> What is a call feature on a bond? How will a call feature affect investor interest in purchasing the bond?

> What is the purpose of insurance? What is meant by the term liability? How can individuals benefit from insurance?

> You teach Personal Finance at a local community college. The state in which you teach requires proof of liability insurance to renew your license plates. During the discussion of this topic in class, several students admit that they obtain a liability po

> Why is it important to carefully review the types of perils covered by your homeowner’s insurance policy? What are some common perils that are not covered by many homeowner’s policies?

> How does your credit history impact your insurance costs?

> Why does your geographic location impact the cost of homeowner’s insurance? Why does it impact the cost of your automobile insurance?

> What is group term life insurance? What are the advantages of group term life insurance?

> Why do some people choose to accept risk rather than purchase insurance? Why is this mind-set problematic?

> List some ways you can reduce risk and limit your overall exposure to loss.

> What is the purpose of an umbrella personal liability policy? Who might need one?

> How renter’s insurance is different from homeowner’s insurance? Who should consider purchasing renter’s insurance? Briefly describe some of the provisions of a renter’s insurance policy.

> Describe the steps you would take to file a claim on your homeowner’s insurance

> What are some steps you could take to reduce your homeowner’s insurance premium?

> List and briefly describe some of the factors that affect homeowner’s insurance premiums.

> Is personal property typically insured under a homeowner’s insurance policy? If so, are there limits to the coverage of personal property? What is a home inventory?

> List and briefly describe the four packages of homeowner’s insurance that focus on insurance for the home

> What is homeowner’s insurance? How the premiums are normally paid?

> Why do some people postpone buying life insurance even when they need it?

> What steps should you take if you are in a car accident?

> What is the intent of no-fault insurance? How does no-fault insurance generally work? What is a disadvantage of no-fault insurance?

> List and briefly discuss factors that will affect your auto insurance premium.

> Describe collision and comprehensive coverage. Is this type of coverage required by most states? Who may require this type of coverage?

> How does medical payments coverage under an auto insurance policy work? Why is medical payments coverage valuable even if you have a good health insurance plan?

> Describe the two types of financial responsibility laws most states have. Are these laws always effective?

> What do policy limits of 25/50/25 mean? Do you think the minimum amounts of liability insurance required by your state are suitable for all drivers? Explain your answer

> Describe the two components of liability coverage in an auto insurance policy.

> What is the role of insurance underwriters? What is the role of insurance agents? Describe the two different types of insurance agents.

> What is the responsibility of the insurance company that sells you a policy? What is the relationship between insurance company claims and premiums paid by policyholders?

> What is the interest payments option? How does it differ from the installment payments option?

> What is risk? What is risk management? How does insurance fit into risk management?

> Paul wants to purchase his own home. He currently lives in an apartment, and his rent is being paid by his parents. Paul’s parents have informed him that they would not pay his mortgage payments. Paul has no savings, but can save $400 per month. The home

> If the cost of refinancing their house is $3,860, how long would Doug and Lynn (from problem 9) have to remain in their home to recover the cost? (Ignore any interest on the savings in answering this question.)

> Matt (from problem 7) paid mortgage interest of $4,330 during his first year in the condo. His property taxes were $600, and his homeowner’s insurance was $460. If Matt is in a 25% marginal tax rate bracket, what were his tax savings for his first year?

> Matt has found a condominium in an area where he would enjoy living. He would need a $5,000 down payment from his savings and would have to pay closing costs of $2,500 to purchase the condo. His monthly mortgage payments would be $520 including property

> Teresa rents her apartment for $650 per month, utilities not included. When she moved in, she paid a $700 security deposit using money from her savings account that was paying 3% interest. Her renter’s insurance costs her $60 per year. What are Teresa’s

> This month you made a mortgage payment of $700, of which $600 was an interest payment and $100 a payment of the loan principal. You are in the 25% marginal tax bracket. What are the tax savings as a result of this payment?

> Lloyd and Jean are considering purchasing a home requiring a $75,000 mortgage. The payment on a 30-year mortgage for this amount is $498.97. The payment for a 15-year maturity is $674.12. What is the difference in the total interest paid between the two

> Larry and Laurie have found a home and made a $125,000 offer that has been accepted. They make a down payment of 10%. Their bank charges a loan origination fee of 1% of the loan and points of 1.5% (both are based on the loan amount). Other fees include a

> Dorothy and Matt are ready to purchase their first home. Their current monthly cash inflows are $4,900, and their current monthly cash outflows are $3,650. Their rent makes up $650 of their cash flows. They would like to put 10% of their cash inflows in

> What are settlement options? Which option should you choose?

> Insurance. Justin’s new FHA mortgage is for $131,500. How much will his overall mortgage increase with an upfront fee of 1.5%? How much will his total mortgage be with the upfront PMI fee added? Will Justin always pay PMI on this loan?

> Why is the reputation of the school system in the area of the home you are buying important?

> List the criteria you should use when selecting a home.