EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 11, Problem 8QTD
Summary Introduction
To discuss: The reason why numerous people and organizations buy insurance policies.
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James stilton is the chiel executive officer (CEO) of RightLiving, Inc., a company that buys life insurance policies at a discount from terminally ill person and sells the policies to investors. RightLiving pays the terminally ill patients a percentage of the future dealth benefits. he patient receives the cash to use for medical and other expenses, and the investors are "gauranteed" a postive return on thier investtment. The diffrence between the purchase and sale prices is RightLiving's profit.
Stilton is aware that some sick patients may obatin insurance policies through fraud (by not rvealing thier illness on the insurance appolication). An insurance company that discovers such fraud will cancel the policy and refuse to pay. Stilton bellieves that most of the policies he has purchased are ligitmate, but he knows that some are probly not.
Question
Would a person who aheres to the principles of rights consider it ethical for Stilton not to disclose the potential risk of…
How would the quick ratio be affected by a prepayment of $30,000 for fire and liability insurance?
a.
The quick ratio would decrease.
b.
The quick ratio would increase.
c.
The quick ratio would not change.
d.
The effect cannot be determined from the information given.
In the context of the health insurance and the life insurance, choose the sentence that IS NOT CORRECT: *
The deductible in a health insurance is an amount of money the insured must pay before benefits become payable by the insurance company.
When we buy a health insurance, we should make sure that we have enough insurance (the opportunity cost of not being adequately insured can be extremely high), but without wasting money by overinsuring
Group Health Insurance (most of them being employer sponsored) represents a small percentage (around 5%) of all health insurance issued by health and life insurance companies.
In a life insurance, a person purchases a policy by paying a premium and the insurance company promises to pay a sum of money at the time of the policyholder’s death to the designated beneficiary.
Chapter 11 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 11 - Prob. 1QTDCh. 11 - Prob. 2QTDCh. 11 - Prob. 3QTDCh. 11 - Prob. 4QTDCh. 11 - Prob. 5QTDCh. 11 - Prob. 6QTDCh. 11 - Prob. 7QTDCh. 11 - Prob. 8QTDCh. 11 - Prob. 9QTDCh. 11 - Prob. 10QTD
Ch. 11 - Prob. 1PCh. 11 - Prob. 2PCh. 11 - Prob. 3PCh. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - Prob. 6PCh. 11 - Prob. 7PCh. 11 - Prob. 8PCh. 11 - Prob. 9PCh. 11 - Prob. 10PCh. 11 - Prob. 11PCh. 11 - Prob. 12PCh. 11 - Prob. 13PCh. 11 - Prob. 14PCh. 11 - Prob. 15PCh. 11 - Prob. 16PCh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Prob. 23PCh. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26PCh. 11 - Prob. 28PCh. 11 - Prob. 29P
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- An insurance company estimates that drivers have 1% chance of getting intoan accident that will cost the driver $10,000. There are two types of drivers:the ones with $50,000 in the bank and the ones with only $5,000. In case of anaccident those with $5,000 will declare bankruptcy and creditors could onlyrecover $5,000. What is the fair price of insurance and will those with $5,000in the bank buy it? Why?arrow_forwardHome insurance policies may cover jewelry for $1,000 and silverware for $2,500 unless these items are covered with additional insurance. If $3,300 worth of jewelry and $2,100 worth of silverware were stolen from a family, and the policy has a deductible of $1,000, what amount of the claim would not be covered by insurance?arrow_forwardSuppose health-care reform Y makes it unlawful for insurance companies to deny insurance to persons with a preexisting disease and sets a fine for those people who do not buy insurance. It follows that if the fine is a. larger than the benefits derived from not buying insurance right away, then people will not buy the insurance and pay the fine. b. smaller than the benefits derived from not buying the insurance right away, then people will not buy the insurance and pay the fine. c. There is not enough information provided to answer this question. d. larger than the benefits derived from not buying insurance right away, then people will buy the insurance right away and not pay the fine.arrow_forward
- Mandren Inc. has a fire insurance policy from the Blundi Insurance Company with a 90% coinsurance clause based on replacement cost. The replacement cost of the building is $600,000. The face amount of the policy Mandren purchases is $400,000. If a covered loss in the amount of $550,000 occurs, how much will Mandren collect from their insurer?arrow_forwardThe PBO was $100 million at the beginning of the year and $114 million at the end of the year. At the end of the year, pension benefits paid by the trustee were $6 million and there were no pension-related OCI account. The actuary's discount rate was 5%. What was the amount of the service cost for the year? (Enter your answer in million, round to the nearest million, without dollar sign, ex. 123 or -123).arrow_forwardIf a CFP® professional engaging in financial planning represents his compensation method as fee-only, then which of the following is an acceptable form of compensation for him? A) Fees collected on the management of a client's investment assets VOC CA 103000 Ane Mon som mempun B) A commission earned on the sale of a variable annuity D de pe imp hun 2001 que 200 OC) A commission earned on the sale of a term life policy O D) A commission earned on the sale of a whole life policyarrow_forward
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