Finance Exam 2 Ch. 5-9

$17,800 (20,000*.11 = 2,200; 20,000-2,200 = 17,800)

A car depreciates 11% when you drive it off the lot. If Josh bought a car for $20,000, what is it worth when he drives it off the lot?

c. $26,700

A car depreciates 11% when you drive it off the lot. If Josh bought a car for $30,000, what is it worth when he drives it off the lot? a. $0 b. $3,300 c. $26,700 d. $30,000

b. $3,300

A car depreciates 11% when you drive it off the lot. Josh bought a car for $30,000 using a loan from Car Loans Stink. If he crashes the car on the way home and he didn't have gap insurance how much does he still owe Car Loans Stink? a. $0 b. $3,300 c. $26,700 d. $30,000

True

A deductible is the amount you pay before insurance begins to cover a loss

d. HDHP

A health savings account has to be paired with which type of health insurance plan? a. HMO b. PPO c. Medicaid d. HDHP

a. make your offer more attractive

A pre-approval will______? a. Make your offer more attractive b. Guarantee you will get the loan c. Guarantees you will be able to afford the mortgage payment d. Involve an in-depth investigation

2

A suicide clause normally lasts for ___ years

True

According to the most recent study from the Center for Medicare and Medicaid Services, healthcare spending for a working-age person was $6,632 per year

False (the interest rate varies)

An ARM or variable mortgage varies the length of the mortgage

a. Protection that the house is worth what you agreed to pay

An appraisal is a good idea because it is _______. a. Protection that the house is worth what you agreed to pay b. A useless expense c. A guarantee that nothing is wrong with your house d. Documentation that your house will never lose value

c. property taxes and insurance

An escrow account is where you put money for _____. a. Earnest money b. Appraisal costs c. Property taxes and insurance d. None of the above

True

(T/F) A VA or FHA loan requires a smaller down payment than conventional

False

(T/F) A disadvantage of a new car is that it will require lots of maintenance

True

(T/F) A need-based analysis will provide you with the most accurate need for life insurance.

true

(T/F) COBRA legislation requires employers to offer health insurance to former employees for 18 months after they leave

True

(T/F) Comprehensive insurance will cover damage to your car caused by an animal hitting your car.

True

(T/F) Disability insurance is just as important, if not more important, than life insurance.

True

(T/F) Higher interest rates, all else equal, mean higher payments

False

(T/F) If I use the 10 times rule of thumb, I should purchase $1 million of life insurance if my salary is $50,000

False

(T/F) If the apartment you are living burns down, your landlord is required to replace your property.

True

(T/F) In a mult-family dwelling you only own the building

True

(T/F) Insurance is paying a cost to an insurance company so that the insurance company will pay to replace the insured item if there is a loss.

True

(T/F) It's really important to document any existing damage before moving into an apartment

True

(T/F) Lemon law will require the car manufacturer to replace your car if there is 3 or more attempts to fix the same problem

False

(T/F) Refinancing your credit card into an auto loan is a good idea because you are making unsecured credit, secured credit

False

(T/F) Replacement cost insurance is cheaper than actual cash value.

False

(T/F) Social Security Administration will pay out disability benefits to anyone who applies

False - permanent

(T/F) Term life insurance has a built-in savings account to pay premiums

False

(T/F) The longer the car loan the higher the payment

False

(T/F) There is no need to read your lease, they are all the same

true

(T/F) Typically, a suicide clause will prevent a beneficiary from collecting life insurance proceeds from the insured committing suicide for the first two years of the policy.

False

(T/F) Used cars have never been owned before.

True

(T/F) You want enough property coverage homeowner's insurance to rebuild the home, not what it is worth.

$235,000 * .60 = $141,000

Emily has a homeowner's policy for her house. Her house was insured for $235,000 and her homeowner's policy provided coverage for personal belongings up to 60% of the insured value of the house. Calculate how much insurance coverage Emily's policy provides for her personal possessions.

False

Health insurance will cover plastic surgery

Points are $3000. 3000/150 = 20 months

If I pay 2 points to buy down my interest rate on a $150,000 mortgage and it decreases my payment by $150, how many months do I need to own to make it worth paying points?

150,000* .01 = 1500 1500/100 = 15 months

If I pay a point of 1% on a $150,000 mortgage I would pay $1500 at closing, but my payment would go down $100. How many months would it take to make it worth paying points?

20% * $200,000 = $40,000

If Isabella is going to use a conventional lender to buy a $200,000 house, how much of a down payment would they like?

$1530

If one family member has a doctor and prescription medication expenses of $2800, what amount would the PPO insurance company pay? Deductible: $1000 per person Co-insurance: 85/15 Insurance payment=(claim amount - deductible)*.85

c. 10 (400/41 = 9.76)

If the car dealership offers you a lifetime oil change plan for $400 and charge $41 per oil change, how many oil changes do you have to get to make it worth it? a. 0 b. 5 c. 10 d. 15

-$1467.53

If you are buying a house for $250,000 with a $50,000 down payment, what would the monthly mortgage payment be with 8% APR and a 30 year mortgage? (done on excel)

a. Software engineer

If you are employed as a software engineer and have an own occupation provision in your disability policy, which of the following jobs would you have to be able to do to stop receiving disability benefits? a. Software engineer b. Cashier at McDonalds c. Customer service representative at Spectrum insurance d. Plumber

a. 35 years after the policy begins

If you have a 30-year term policy, when will it no longer pay out a death benefit? a. 35 years after the policy begins b. 25 years after the policy begins c. 20 years after the policy begins d. 15 years after the policy begins

$3000/month (5000*.60)

If you have selected a 60% disability benefit on $5000 a month. What is the benefit amount you would receive?

c. $6,500

If you have selected a 65% disability benefit on $10,000 a month. What is the benefit amount you would receive? a. $0 b. $3,500 c. $6,500 d. $10,000

$750,000

If you use the 10 times rule of thumb to calculate the necessary amount of life insurance, how much life insurance should you pay if you make $75,000?

True

In a PPO plan an in-network doctor is cheaper than an out-of-network doctor

$3000 (4000-1000)

Micah has a health insurance policy that includes a deductible of $1000. If his total bill is $4000, how much will his insurance pay?

$1600 (4000-1000)*20% = 3000 3000*20% = 600 600 + 1000 = $1600

Micah is considering between two health insurance policies. One includes a deductible of $1000 and the other includes a co-insurance of 20% after a $1000 deductible. If a bill is $4000, how much will he be required to pay under the policy with the co-insurance? Co-insurance cost: (Bill-deductible)*coinsurance requirement + deductible

c. $500

Micah is considering between two health insurance policies. One includes a deductible of $300 and the other includes a co-insurance of 20% after a $100 deductible with an out-of-pocket max of $500. If a bill is $4,000, how much will he be required to pay under the policy with the co-insurance? a. $100 b. $300 c. $500 d. $880

d. $880

Micah is considering between two health insurance policies. One includes a deductible of $300 and the other includes a co-insurance of 20% after a $100 deductible. If a bill is $4,000, how much will he be required to pay under the policy with the co-insurance? a. $100 b. $300 c. $500 d. $880

c. $520

Micah needs new glasses. He pays a monthly premium of $25 for eye insurance through work. He has a copay for the exam of $20 and a copay of $25 for frames and $25 for lenses. The allowance for frames is up to $200. If Micah wants to get transition lenses it will cost an additional $50 copay. How much will Micah pay in a year's time for premiums, eye exam, $300 frames, and new transition lenses? a. $120 b. $300 c. $520 d. $125

b. $150 (50*3)

Micah went to the doctor three times, and each appointment cost $200. His copayment was $50 per visit. How much was Micah required to pay in total for his three visits? a. $50 b. $150 c. $450 d. $600

b. $6000

Most home insurance policies cover jewelry for $1,000 and silverware for $2,500 unless items are covered with additional insurance. If $4,000 worth of jewelry and $5,500 worth of silverware were stolen from a family, what amount of the claim would not be covered by insurance? a. $1,000 b. $6,000 c. $3,000 d. $2,500

$7000 ($4,600 - $1,000)+($5,900 - $2,500)

Most home insurance policies cover jewelry for $1000 and silverware for $2500 unless items are covered with additional insurance. If $4,600 worth of jewelry and $5,900 worth of silverware were stolen from a family, what amount of the claim would not be covered by insurance?

a. limited

Owen's Nintendo Switch stopped working after 10 months. The hard drive failed. Nintendo offers to pay for the parts but not the labor to fix the Switch. This is an example of what type of warranty? a. limited b. full c. implied d. fussy

$15,000 $14,320

Richard Trang has 75/135/15 auto insurance coverage. One evening he lost control of his vehicle, hitting a parked car and damaging a storefront along the street. Damage to the parked car was $7,500, and damage to the store was $21,820. What amount will the insurance company pay for damages? $__________ What amount will Richard have to pay? $__________

b. full

Shawna bought a car 1 month ago. The transmission went out. The car lot will pay for the parts and labor. This is an example of what type of warranty? a. limited b. full c. implied d. fussy

a. Liability coverage

Someone trips on your property and breaks their ankle. They sue you for medical expenses what part of your homeowner's policy would pay to cover the expenses? a. Liability coverage b. Property coverage c. Personal property coverage d. Personal property floater

$4,000 Cost of credit= Down payment + (payment amount x number of payments) - cash price

Steve is comparing the cost of credit to the cash price of an item. If Steve makes a down payment of $1,000 and pays $500 a month for 36 months, how much more will that amount be than the cash price of $15,000?

a. $100,000 each

Tim Paramour has 100/300/100 automobile insurance coverage. If two other people are awarded $125,000 each for injuries in an auto accident in which Tim was judged at fault, how much would the insurance cover? a. $100,000 each b. $125,000 each c. $100 each d. $300 total

$170,000

Tim Paramour has 85/170/95 automobile insurance coverage. If two other people are awarded $130,000 each for injuries in an auto accident in which Tim was judged at fault, how much of this judgment would the insurance cover?

c. Umbrella insurance

Turns out the person who tripped on your property is a brain surgeon. They can't bear weight on their broken ankle ever again and so they can't be a doctor. Your homeowner's policy doesn't have enough coverage to pay the $5000,000 the judge awarded him for lost wages. What insurance would help pay the extra not covered by your homeowner's policy? a. Auto insurance b. Disability insurance c. Umbrella insurance d. None of the above

a. Semi-annual cleanings

Typically, dental insurance covers what at no cost? a. semi-annual cleanings b. wisdom teeth extractions c. braces d. root canals

false

Under a HDHP (high deductible health plan) the employer pays more of the cost than the employee

False

Under-insured insurance coverage is for if you don't have enough insurance

b. $750

What amount would the insurance company cover if your car stereo system is stolen and is worth $1,000 and you have a deductible of $250? a. $250 b. $750 c. $1,000 d. None of the above

$1800

What amount would the insurance company pay: Theft of a stereo system worth $2400, the insured has a deductible of $600

$0

What amount would the insurance company pay: Vandalism that does $550 of damage to a home, the insured has a deductible of $600

$1400

What amount would the insurance company pay: Wind damage of $2000 the insured has a deductible of $600

b. sign paperwork to finalize the home buying process

What happens at closing? a. Sign paperwork to finalize the lease b. Sign paperwork to finalize the home buying process c. The mortgage lender goes out of business d. None of the above

b. lease terms

What is NOT included in an offer? a. price b. lease terms c. contingencies d. closing date

b. money coming out isn't taxed if used for the specific purpose

What is an advantage of a flexible spending account? a. money going in is taxed b. money coming out isn't taxed if used for the specific purpose c. you can use leftover money from year to year d. you can use the money to help you become more flexible

b. flexibility to move once the lease is up

What is an advantage of renting? a. You have to fix a broken appliance b. Flexibility to move once the lease is up c. Harder to qualify then buying d. Loud neighbors

c. Freedom to do whatever you want outside

What is not a feature of a condominium? a. shared walls b. common areas controlled by a condo association c. freedom to do whatever you want outside d. there are fees to maintain the common areas

Typically lasts 6-8 years

What is not a feature of a lease? a. typically lasts 6-8 years b. typically lower payment than buying c. not responsible for the maintenance d. at the end of the term, you don't own the car

d. a condo is bought, an apartment is rented

What is the difference between an apartment and a condominium? a. The name b. A condo is rented, an apartment is bought c. A condo is a multi-family dwelling, an apartment is not d. A condo is bought, an apartment is rented

a. location

What is the most important thing when looking for a house? a. Location b. Physical appearance c. Decorating d. All of the above

c. contingent beneficiary

What is the name of the person who will receive the death benefit if the insured and primary beneficiary are dead? a. primary beneficiary b. death benefit c. contingent beneficiary d. premium

a. primary beneficiary

What is the name of the person who will receive the death benefit of a life insurance policy? a. primary beneficiary b. death benefit c. contingent beneficiary d. premium

b. death benefit

What is the term for the amount the designated person will receive when the insured dies? a. primary beneficiary b. death benefit c. contingent beneficiary d. premium

d. premium

What is the term for the amount you pay to keep an insurance policy active? a. primary beneficiary b. death benefit c. contingent beneficiary d. premium

Yes

When Emily's house burned down, she lost household items worth a total of $135,000. Will she receive full payment for all of the items destroyed in the fire?

a. You want to make sure there is money for funeral expenses no matter how long you live

When does permanent insurance make sense? a. You want to make sure there is money for funeral expenses no matter how long you live b. You only need insurance for 10 years c. You want the cheapest premium possible d. All of the above

c. Medicare

Which governmental health insurance provides coverage to people that are older than 65 as well as those of Social Security Disability? a. HMO b. PPO c. Medicare d. HDHP

a. Used car purchase loans have a lower interest rate

Which is NOT true of a used car purchase? a. Used car purchase loans have a lower interest rate b. Has had previous owners c. Much less depreciation d. Left with someone else's neglect

d. emergency fund

Which is not a use for life insurance? a. debt repayment b. income replacement c. burial expenses d. emergency fund

d. Life

Which of the following insurances aren't required? a. Home b. Health c. Auto d. Life

a. Higher premiums than a PPO

Which of the following is NOT a characteristic of an HMO? a. Higher premiums than a PPO b. Pick one doctor and referred out for specialists c. Doctors work directly for the insurance company d. None of the above

d. All of the above

Which of the following is a factor that influences your car insurance premium? a. Age b. Sex c. Credit Score d. All of the above

d. agree to anything they say

Which of the following is not a good negotiation technique? a. do your research b. silence c. walk away d. agree to anything they say

c. Disability is a result of a work-related accident

Which of the following is not a requirement to be eligible for social security disability? a. Have to work the right number of quarters b. Incapable of doing your previous job as well as not be able to adapt to a different job c. Disability is a result of a work-related accident d. Disability is expected to last at least 12 months

d. All of the above

Which of the following is/are features of the Affordable Care Act? a. eliminates co-pays for preventative care b. allows young people to remain on parents' coverage to 26th birthday c. prohibits denying coverage to children with pre-existing conditions d. all of the above

c. Damage to your car for an accident where you were at fault

Which of the following items would not be covered with liability car insurance? a. Property damage to another car in an accident that was your fault. b. Medical costs for a passenger in the other car in an accident that was your fault. c. Damage to your car for an accident where you were at fault. d. Pain and suffering costs for the driver of the car you hit where you were determined to be at-fault for the accident.

c. Leaky pipe causes toilet to fall through the floor

Which of the following would NOT be covered with a homeowner's policy without extra insurance? a. Sudden flood from a hot water explosion. b. Theft of television c. Leaky pipe causes toilet to fall through the floor. d. Fire destroys your home.

b. An agent who has a good reputation and has been in the industry for more than 10 years

Who would be the best insurance agent to use to purchase life insurance? a. Your friend who just graduated from college and became an insurance agent b. An agent who has a good reputation and has been in the industry for more than 10 years c. An agent who only recommends very expensive life insurance premiums d. Any of these would be a good choice for a life insurance agent

d. all of the above

Why is a down payment on a house important? a. The lender requires it. b. Less likely to owe money in a foreclosure situation c. Larger the down payment, the smaller the mortgage payment d. All of the above

c. implied

Beth bought a calculator that doesn't do multiplication correctly. The company refunds her money. This is an example of what type of warranty? a. limited b. full c. implied d. fussy

300*12*10 = 36,000

Condominiums usually require a monthly fee for various services. At $300 a month, how much would a homeowner pay over a period of 10 years for living in this housing facility?

True

There are financial incentives to visit in-network doctors