RMI 4115 cumulative

Today, Jaina's gross human capital is $2,250,000, implicit liabilities are $850,000, financial assets are $5,000 and economic net worth is $829,927. Jaina's annual valuation rate is 5%. What are Jaina's net human capital?

$1,400,000

Suppose Sophia has $300,000 today. She wants to spend this evenly over 30 years. Assume 0% valuation rate, i.e., banks don't pay interest. How much can she spend every year under the consumption smoothing framework?

$10,000

The XYZ Corporation offers group health insurance coverage to its eligible employees which specifies a $200 calendar year deductible with 20% coinsurance rate. The annual out-of-pocket limits are $1,000 for unmarried individuals and $2,000 for families. The annual health insurance premiums are $800 for unmarried individual and $1,200 for married individuals. This information indicates that, for a given calendar year, the most a covered unmarried individual would have to pay for eligible medical expenses under the health plan excluding premium is:

$1000

A bank is willing to lend Albert $50,000 for a home improvement loan to be repaid annually over 5 years based on 7% interest. What is the amount of each annual payment required to repay the loan (to the nearest whole dollar)?

$12,195

Assume that Dede starts working for a large retail company today. Today is January 1st, 2019. She will receive $50,000 every year, paid at the end of the year. If she spends $15,000 every year and saves the rest for 4 years, assuming a valuation rate of 5%, what is the present value of her saving stream today (to the nearest whole dollar)? Neither Dede 's salary nor spending changes over time.

$124,108

Jackie's gross human capital today is $1,400,000 and implicit liabilities today is $960,000. Her financial capital is $55,000 worth today. The appropriate annual valuation rate for Jackie is 3%. Today is January 1st, 2019. She plans to spend discretionary consumption each year for the next 55 years, with zero patience parameter. Her consumption (discretionary and non-discretionary) occurs at the end of each year. She is trying to solve her optimal discretionary consumption under the consumption smoothing framework. What is her optimal amount of discretionary consumption at the end of 2019, if she changes her patience parameter to be 0.01 (to the nearest whole dollar)?

$15,003

Mr.Ecks owns a house valued at $200,000 and his mortgage balance is $97,000 for that house. In this case, ________ is the value of what he owns for the house and _______ is what he "truly" owns for the house.

$200,000; $103,000

June, a recent FSU graduate, just turned 23 today. He wants to invest money today that will be worth exactly $5,000 in two years. Assuming a valuation rate of 3%, i.e. investment will grow at 3%, how much does he need to invest today (to the nearest whole dollar)?

$4,173

Thomas suffered a heart attack and was rushed to the hospital where heart surgery was performed. His total bill for medical services was $50,000. Thomas has a health insurance policy with a $1,000 calendar-year deductible and a $5,000 out-of-pocket limit. His coinsurance percentage is 20 percent and copayment for any hospital care is $0. Assume this hospitalization was the first medical care that Thomas received during the year and that all of the hospital services were eligible for coverage under the policy. How much of the $50,000 will the insurance company pay?

$45,000

Amelia, 30 years old, will start working at Wallas tomorrow. Today is December 31st, 2020. Currently, she owns $100,000 financial assets and has outstanding debt of $40,000. She expects to earn steady annual income of $40,000 that will grow at the rate of 5% annually for the next 40 years. She is expected to spend $15,000 as non-discretionary consumption every year until she dies in 55 years, which will grow at 3% rate annually. Both her salary and consumption will happen at the end of each year. The appropriate annual valuation rate for her is 2%. Now suppose she plans to spend discretionary consumption that will grow at the rate of 1% every year. What is the optimal amount of her discretionary consumption at the end of 2021 (to the nearest whole dollar)?

$45,717

Jim expects to receive $100,000 in 10 years. Assuming a discount rate of 8%, what is $100,000's worth to Jim today?

$46,319

Suppose that Jerome will start a job with an annual salary of $25,000 that is paid at the end of each year, with an annual growth rate of 5%. Today is the beginning of the year. Jerome expects to receive salary for next 30 years. The appropriate annual valuation rate for Jerome is 4%. What is the value of Jerome's economic net worth today if his financial capital today is $10,000 and net human capital today is $450,000 (to the nearest whole dollar)?

$460,000

Aisha, a recent FSU graduate, just turned 23 today. She wants to invest money today that will be worth exactly $5,000 in two years. Assuming a valuation rate of 0% how much does she need to invest today (to the nearest whole dollar)?

$5,000

Today, Jaina's gross human capital is $2,250,000, implicit liabilities are $850,000, financial assets are $5,000 and economic net worth is $829,927. Jaina's annual valuation rate is 5%. If Jaina would change her annual valuation rate from 5% to 3.5%, all else equal, what would be her financial assets today (to the nearest whole dollar)?

$5,000

Today, Jaina's gross human capital is $2,250,000, implicit liabilities are $850,000, financial assets are $5,000 and economic net worth is $829,927. Jaina's annual valuation rate is 5%. What are Jaina's explicit liabilities today?

$575,073

Which of the following additional information would affect your decision if you would choose a job based on net human capital?

$70,000 yearly cost of housing differences between Florida and New York

Dana wants to invest a lump sum today that will be worth $1,000,000 in 40 years. Assuming a discount rate of 6%, how much does she need to invest today (to the nearest whole dollar)?

$97,222

Jane is retiring today. Her retirement plan allows her to either receive $50,000 at the end of each year for the next 40 years or a lump sum today. If the appropriate annual valuation rate is 4 percent, what is the minimum amount of a lump-sum she will be willing to accept today (to the nearest whole dollar)?

$989,639

Which of the following is a possible value of patience parameter for a person with a consumption path of the green dashed line?

-0.02

Suppose Sophia has $300,000 today. She wants to spend this evenly over 30 years. Assume 0% valuation rate, i.e., banks don't pay interest. How much can she spend every year under the consumption smoothing framework?

10,000

Assume that Eleanor starts working for a large retail company today. Today is January 1st 2019. She will receive $45,000 every year, paid at the end of the year. If she spends $15,000 every year and saves the rest for 4 years, what is the present value of her saving stream today (to the nearest whole dollar)? Assume a valuation rate of 4%. Neither Eleanor's salary nor spending changes over time.

108,897

Jackie's gross human capital today is $1,400,000 and implicit liabilities today is $960,000. Her financial capital is $55,000 worth today. The appropriate annual valuation rate for Jackie is 3%. Today is January 1st, 2019. She plans to spend discretionary consumption each year for the next 55 years, with zero patience parameter. Her consumption (discretionary and non-discretionary) occurs at the end of each year. She is trying to solve her optimal discretionary consumption under the consumption smoothing framework. What is the optimal amount of discretionary consumption for Jackie at the end of this year (to the nearest whole dollar)?

18,488

Below is the working spreadsheet for Mr.Ecks's financial planning project. If the valuation rate (highlighted in yellow in cell M2) changes from 0.04 to 0.05, the value of Present value of Non-discretionary consumption in year 1 (cell F3, highlighted in a black box) would be:

44,571.43

Dirk suffered a heart attack and was rushed to the hospital where heart surgery was performed, in February 2020. His total bill for medical service was $50,000, and there was $0 copayment. Dirk has a health insurance policy with a $100 monthly premium, a $1,000 calendar-year deductible (which is relatively low in the market) and a $5,000 out-of-pocket limit. His coinsurance percentage is 20 percent. Assume this hospitalization was the first medical care that Dirk received during the year and that all of the hospital services were eligible for coverage under the policy. How much should Dirk's insurance company pay for Dirk's medical services (excluding premiums)?

45,000

Dirk suffered a heart attack and was rushed to the hospital where heart surgery was performed, in February 2020. His total bill for medical service was $50,000, and there was $0 copayment. Dirk has a health insurance policy with a $100 monthly premium, a $1,000 calendar-year deductible (which is relatively low in the market) and a $5,000 out-of-pocket limit. His coinsurance percentage is 20 percent. Assume this hospitalization was the first medical care that Dirk received during the year and that all of the hospital services were eligible for coverage under the policy. How much should Dirk pay for his medical services (excluding premiums)?

5,000

Today, Jaina's gross human capital is $2,250,000, implicit liabilities are $850,000, financial assets are $5,000 and economic net worth is $829,927. Jaina's annual valuation rate is 5%. If Jaina would change her annual valuation rate from 5% to 3.5%, all else equal, what would be her financial assets today (to the nearest whole dollar)?

5,000

If your total assets including gross human capital is worth $104,000 today and your total liabilities including present value of future non-discretionary consumption is $103,500 today, your economic net worth today is:

500

Nora has $4,000. If she puts it in the bank today, and receives 4% annual interest, how much will she have in 15 years (to the nearest whole dollar)?

7,204

Connie has a health insurance policy with $200 deductible. She is required to pay 25 percent of covered expenses in excess of the deductible. If Connie has eligible medical expenses of $10,000, how much will be paid by her insurer?

7,350

Suppose you have health insurance plan with $1,200 yearly premium, $250 deductible, and 20% coinsurance with $8,000 out-of-pocket limit. Copayments differ depending on the type of medical care and assume that copayments do not count toward your deductible yet it counts under out-of-pocket limit. You had two medical treatments this year from two visits; the first one's medical expenditure is $3,000 and the second one is $10,000, and both had copays of $25 per visit. What is the total amount you had to pay out of pocket for the first medical treatment?

825

Suppose that Jerome will start a job with an annual salary of $25,000 that is paid at the end of each year, with an annual growth rate of 5%. Today is the beginning of the year. Jerome expects to receive salary for next 30 years. The appropriate annual valuation rate for Jerome is 4%. What is the value of Jerome's future salary today (to the nearest whole dollar)?

831,339

Below is the working spreadsheet for Mr.Ecks's financial planing project. What is the correct formula for his year 1 financial capital (cell J3, highlighted in a black box)?

=J2*(1+$M$2)+I3

Under the consumption smoothing framework, any of the below assumption is possible except:

An abrupt change in discretionary consumption

The effect of an annual out-of-pocket limit in health insurance is to:

Cover 100 percent of eligible medical expenses after an insured has incurred a specified amount of out-of-pocket expenses

Susan's current salary is $50,000 per year, paid annually at the end of the year, and grows steadily at 5% per year. What is her appropriate valuation rate?

Depends on her personal opportunity costs and characteristics of the job

Opi's current salary is $40,000 per year, paid annually at the end of the year, and grows steadily at 5% per year. What is his appropriate valuation rate?

Depends on his personal opportunity costs and characteristics of the job

Which of the following is true about balance sheets?

Economic balance sheets include explicit liabilities

When calculating present value of future salary, we need to use the future value of annuities with growth rate (FVAG) formula.

False

Below is the working spreadsheet of Mr.Ecks's financial planning project. If only his patience parameter (yellow highlighted cell M6) changes from 0 to 0.02, which of the cells in row 3 for Year 1 (or age 30, all in the black box) would change? Select all that will change.

G3, h3, I3, J3

In calculating economic net worth, we subtracted implicit liabilities from gross human capital because:

Gross human capital does not consider costs associated with future earnings

Which of the following is not needed for calculating your Gross Human Capital?

Health and retirement benefits

Below is the working spreadsheet for Mr. Ecks' gross human capital. Which of the following statement is true?

His salary is increasing every year

The iron clad relationship of public policy consideration on health insurance implies that:

If we want to increase accessibility, we might face higher costs and/or lower quality

Today, Jaina's gross human capital is $2,250,000, implicit liabilities are $850,000, financial assets are $5,000 and economic net worth is $829,927. Jaina's annual valuation rate is 5%. Her salary growth rate is 5%. Assume Jaina's projection of her salary growth rate was overestimated, i.e., her salary growth rate should be 4% not 5%. Nothing else changes. In this case, which of the following is true, all else equal?

Jaina's gross human capital today will be lower than when the growth rate was 5%

Today, Jaina's gross human capital is $2,250,000, implicit liabilities are $850,000, financial assets are $5,000 and economic net worth is $829,927. Jaina's annual valuation rate is 5%. If Jaina would change her annual valuation rate from 5% to 3.5%, but nothing else changes, which of the following is not true?

Jaina's gross human capital today will be lower than when the valuation rate was 5%

Today, Jaina's gross human capital is $2,250,000, implicit liabilities are $850,000, financial assets are $5,000 and economic net worth is $829,927. Jaina's annual valuation rate is 5%. Assume Jaina's projection of her retirement age was underestimated, i.e., her retirement age should be 5 years older than her projection. Nothing else changes. In this case, which of the following is true, all else equal?

Jaina's gross human capital today would increase

Today, Jaina's gross human capital is $2,250,000, implicit liabilities are $850,000, financial assets are $5,000 and economic net worth is $829,927. Jaina's annual valuation rate is 5%. Her growth rate for non-discretionary consumption is 2%. Assume Jaina's projection of the growth rate of non-discretionary consumption was underestimated, i.e., her non-discretionary consumption should grow by 3% every year not 2%. Nothing else changes. In this case, which of the following is true, all else equal?

Jaina's implicit liabilities today will be higher than when the growth rate was 2%

Today, Jaina's gross human capital is $2,250,000, implicit liabilities are $850,000, financial assets are $5,000 and economic net worth is $829,927. Jaina's annual valuation rate is 5%. Assume Jaina's projection of her age of death was underestimated, i.e., her age of death should be 10 years older than her projection. Nothing else changes. In this case, which of the following is true, all else equal?

Jaina's implicit liabilities today would increase

Kristen has a health insurance policy with a $1,000 calendar-year deductible, a $5,000 out-of-pocket limit, and a 20 percent coinsurance requirement. Kristen was hospitalized for a surgical procedure in March, her first health care treatment received during the calendar year. There was $0 copay for the surgical procedure. The total bill was $20,000. Considering the deductible and coinsurance, how much of this amount must Kristen pay?

Kristen has a health insurance policy with a $1,000 calendar-year deductible, a $5,000 out-of-pocket limit, and a 20 percent coinsurance requirement. Kristen was hospitalized for a surgical procedure in March, her first health care treatment received during the calendar year. There was $0 copay for the surgical procedure. The total bill was $20,000. Considering the deductible and coinsurance, how much of this amount must Kristen pay?

If Mandy's patience parameter for discretionary consumption is 0.03 and it is -0.05 for Dean, which of the following is true under the consumption smoothing framework, everything else equal?

Mandy is willing to wait to consume more later

Amelia, 30 years old, will start working at Wallas tomorrow. Today is December 31st, 2020. Currently, she owns $100,000 financial assets and has outstanding debt of $40,000. She expects to earn steady annual income of $40,000 that will grow at the rate of 5% annually for the next 40 years. She is expected to spend $15,000 as non-discretionary consumption every year until she dies in 55 years, which will grow at 3% rate annually. Both her salary and consumption will happen at the end of each year. The appropriate annual valuation rate for her is 2%. Based on the information given about Amelia only, which of the following is true?

None of the above

Tom has been working for the past 35 years. During the past 35 years, he has been saving 10% of his salary annually and spending the rest as his non-discretionary and discretionary consumption. As a result, he currently has $1,243,510 in his savings account. As he is turning 60 tomorrow, he plans to retire immediately and spend his savings for the rest of his life. He expects to live until he is 90 and has set a fixed amount of $15,000 non-discretionary consumption (annually) until he dies. The appropriate annual valuation rate for his consumption in the future is 2%. Which of the following is true?

None of the above

Part 1 of the financial planning project is due:

October 9th, 2020

Below is the working spreadsheet of Mr.Ecks's financial planning project. If only his patience parameter (yellow highlighted cell M6) changes from 0 to 0.02, which of the following summary cell value among O2 to O7 (cells in the black box of the "Summary") would change?

PV factor for discretionary consumption, O7

Below is the working spreadsheet of Mr.Ecks's financial planning project. Which of the following type of formula should we apply to calculate his PV factor for discretionary consumption (cell O7, highlighted in a re d box)?

PVAG formula

Which of the following is true about the consumption smoothing framework?

People with zero patience parameter spend constant amounts of discretionary consumption

Whether one retains the risk or transfers the risk, both are considered an example of:

Risk financing

John retired five years ago. This year, his medical expenses are larger than he expected. If he purchases additional private health insurance, this is an example of...

Risk transfer

Which of the following information is NOT needed to calculate the present value of an annuity?

The number of periods a person contributed to the annuity

Which of the following is not needed for calculating your Implicit Liabilities?

The number of years you plan to work

Below is the working spreadsheet for Mr. Ecks' gross human capital. Which of the following statement is true?

The sum of "PV of Salary" column is the same as gross human capital today

Under the consumption smoothing framework, the main goal of personal risk management is:

To maximize my standard of living, in the smoothest way possible, over the rest of my life

Which of the following is a reason to buy health insurance under the consumption smoothing framework?

To reduce the possibility of giving up valuable opportunity in the future

Which of the following is true about traditional balance sheets?

Traditional balance sheets include liabilities

A risk averse individual would be willing to buy health insurance in order to:

Transfer a risk

When it comes to the management of risk in the future financial payments associated with health shocks, which of the following is the peril?

Visiting doctor's office for medical conditions

When we assume we have a zero patience parameter under the consumption smoothing framework, this means:

We plan to have a smooth discretionary consumption pattern

My gross human capital:

Will decrease throughout my lifetime

The XYZ Corporation offers group health insurance coverage to its eligible employees which specifies a $500 calendar year deductible. The annual out-of-pocket limit is $1,000 and the annual health insurance premium is $800. For a given calendar year, if the covered individual faces medical expenditures of $400, this would imply that the individual:

Would pay full amount of the medical expenditures

Both coinsurance rate and copay in health insurance policy require the policyholder to share the costs of medical services. The difference between coinsurance and copay is that:

coinsurance only applies after the policyholder hits the deductible; copays exist before and after the deductible has been met

My implicit liabilities are the same as my economic net worth

false

When calculating future value of a lump sum investment, we do not need to know the number of periods we will be investing.

false

Below is the working spreadsheet of Mr.Ecks's financial planning project. If only his patience parameter (yellow highlighted cell M6) changes from 0 to 0.02, which of the cells in row 3 for Year 1 (or age 30, all in the black box) would change? Select all that will change.

g3, h3, i3, j3

For most people in early years of life, their most valuable asset is:

human capital

Suppose you just turned 25 and have two job offers, job A and job B, which will pay at the end of each year. With job A, your salary will start at $35,000 and grow at the rate of 1% every year. With job A, you will live in Florida and retire in 40 years. With job B, your salary will start at $70,000 and grow at the rate of 2% every year. With job B, you will live in New York and retire in 30 years. If the appropriate annual valuation rate for both jobs is 3%, which job should you choose based on gross human capital?

job b

Jackie's gross human capital today is $1,400,000 and implicit liabilities today is $960,000. Her financial capital is $55,000 worth today. The appropriate annual valuation rate for Jackie is 3%. Today is January 1st, 2019. She plans to spend discretionary consumption each year for the next 55 years, with zero patience parameter. Her consumption (discretionary and non-discretionary) occurs at the end of each year. She is trying to solve her optimal discretionary consumption under the consumption smoothing framework. If she changes the plan and wants her discretionary consumption to grow at 1% every year, her discretionary consumption at the end of this year will be _______________ before the change.

lower than

Below is the working spreadsheet for Mr.Ecks's financial planning project. If the salary growth rate (cell M3, highlighted in a red box) changes from 0.03 to 0.01, the value of his gross human capital (cell O2, highlighted in a black box) would be:

lower than 1,347,250.82

Which of the following is an important input for calculating my implicit liabilities?

minimum necessary consumption

The difference between annuities and lump sum payments is that you don't need to know _________________ to calculate the present value of a lump sum payment in the future, while you need that information for the present value of annuities.

number of periodic payments

Jon retired five years ago. This year, his medical expenses are larger than he expected. If he purchases additional private health insurance, this is an example of...

risk management

If your economic net worth today is $40,000 and your gross human capital today is $190,000, your financial capital today is:

there is not enough info

Coco's current salary is $40,000 per year, paid annually at the end of the year. Her salary is growing steadily at 5% per year. Assuming a valuation rate of 4%, what is the value of your earnings today?

theres not enough info

Present value of annuities formula (PVA) can be derived from the present value of annuities with growth formula (PVAG).

true

We subtract implicit liabilities from gross human capital to calculate net human capital, to take into account costs associated with producing our salary.

true

Suppose you just turned 25 and have two job offers, job A and job B, which will pay at the end of each year. With job A, your salary will start at $35,000 and grow at the rate of 1% every year. With job A, you will live in Florida and retire in 40 years. With job B, your salary will start at $70,000 and grow at the rate of 2% every year. With job B, you will live in New York and retire in 30 years. Continue assuming that the annual valuation rate for both jobs is 3%. Which of the following change will affect your calculation of gross human capital for job A, holding everything else equal?

two of the above

Which of the following information is useful to estimate your implicit liabilities?

your predicted life expectancy