5. Computing your liability - An auto insurance example

Although car insurance is legally required by all states, the coverage provided by different policies can vary dramatically, such that even an "insured" motorist can end up paying large amounts of money out-of-pocket. Consider the following example involving Mitch, who has a family auto policy (FAP) that provides liability coverage with limits of 15/30/15, no medical payment insurance, and uninsured and underinsured motorist coverage with limits of 1/2. He has collision and comprehensive auto insurance, both with a deductible of $100.

Suppose one day Mitch fails to notice a red light, causing him to blind-side another car crossing the intersection. Fortunately, he is not badly injured, but the medical bill for his hospital examination nonetheless amounts to $624. The driver of the other car, a woman named Yvette, suffered severe injuries from the direct impact of the accident. She required surgery and a hospital stay and then additional procedures in the months that followed. Her medical bills, plus compensation for being unable to work, totaled $32,634.

Yvette's insurance company successfully filed a claim against Mitch, exercising subrogation rights.

Coverage A of Mitch's plan will reimburse him with ___________ for Yvette's medical bills.

Mitch's medical bills are: not covered, covered under A, covered under b, covered under c

Mitch's car was relatively unharmed by the collision but required $800 in minor repairs; Yvette's car was destroyed, making Mitch liable for paying the $9,300 replacement value. Yvette's car was pushed onto a nearby sidewalk on impact, destroying a nearby lawn and causing additional damage to a parked car. This damage totaled $7,254. Mitch's liability coverage also will reimburse him for up to $________ in property damage, so he is responsible for paying $1554 or $0 or $2354 or $3054

out-of-pocket in property liability damages. Which of the following is true regarding the damage to his own car?

It will be reimbursed up to the difference between his liability coverage and the damage to other property.

It will be reimbursed fully, minus the $100 deductible.

It is not covered under his policy.

Insuring an Older Home

Susan's parents live in a Brownstone-style home built in 1875. Although the house is still standing, it has fallen into disrepair, and the cost of rebuilding it with the original style and quality would be extremely high. If their home were destroyed, Susan's parents would choose to rebuild a much more modest structure rather than restore it to its original state; therefore, they purchase an HO-_____ form policy to provide Replacement value or actual-cash-value protection.

Question 5.

Which of the following best describes Behavioral Finance?

Behavioral Finance concepts are more developed than Traditional Finance.

Behavioral Finance streamlined financial data.

Traditional Finance's introduction of scientific method into financial analysis has some benefit to Behavioral Finance.

Behavioral Finance is very similar to Traditional Finance in its asset pricing models and portfolio theories.

Which of the following are consistent with the Cognitive-Behavioral school of thought?

Humans are beings that are subject to the same learning principles that were established in animal research.

Self-talk, which refers to that ongoing internal conversation one has with oneself that can influence feelings, and behavior can be reinforced and persist.

The counselor's challenge lies in performing a sound evaluation of how reinforcers are maintaining problematic self-talk and behaviors.

The counselor is the expert in the Cognitive-Behavioral Paradigm, but the counselor and client have a working alliance where the client must be actively engaged.

All of the above.

Behavioral investors have been characterized as those who tend to choose portfolios by evaluation and decisions based on expected wealth, desire for security, aspiration levels, and probabilities of aspiration levels.

True

False

Which of the following statements is / are correct?

1. The cause of a loss is a peril.

2. A hazard is a condition that increases the probability of a loss occurring.

1 only.

2 only.

Both 1 and 2.

Neither 1 nor 2.

Part one.

Exercise 2-06 For each situation that follows, identify the foundational principle that best describes it. (a) Allocates expenses to revenues in the proper period. (b) Indicates that market value changes after the purchase are not recorded in the accounts unless impairment exists. (Do not use the revenue recognition principle.) (c) Ensures that all relevant financial information is reported (d) Is why plant assets are not reported at their liquidation value. (Do not use the historical cost principle.) (e) Related to the economic entity principle, defines the entities that should be consolidated in the financial statements. (f) Indicates that personal and business record- Economic entity keeping should be separately maintained. Periodicity (g) Separates financial information into time Full disclosure periods for reporting purposes. Historical cost (h) Permits the use of market valuation in Fair value certain specific situations. Monetary unit Control (i) Requires passing of risks and rewards, Matching measurability, and collectibility before Revenue recognition and realization recording the transaction. Going concern (j) Assumes that the dollar is the measuring unit for reporting financial performance.What is the objective of financial reporting? For each of the situations discussed below, identify the qualitative characteristics of financial information that help provide decision-useful information to users. (a) Marcus Corp. has a management bonus plan based on net income. Marcus records revenue only after the risks and rewards of ownership of the goods it sells have passed to the customer. (b) Beliveau Ltd. is a real estate company that holds land for eventual sale to developers. V Beliveau provides fair value information on its property holdings to its users. (c) Mohawk Inc. has entered into a rentat agreement that will eventually transfer ownership of the manufacturing equipment to Mohawk at the end of three years. Irrespective of the legal documentation, Mohawk will account for this transaction based on its economic impact to the company. (d) Standard setters must ensure that accounting standards do not favour one set of users over another or one industry over another. Relevance Understandability Representational faithfulness Comparability Verifiability Question Attempts: 0 of 2 used Timeliness SAVE BUT1) Which of the following types of services is generally provided only by CPA firms? 1) A) Operational audits. B) Financial statement audits. C) Tax audits. D) Compliance audits. 2) The review of a company's financial statements by a CPA firm: 2) A) Culminates in issuance of a report expressing the CPA's opinion as to the fairness of the statements. B) Requires detailed analysis of the major accounts. C) Is substantially less in scope of procedures than an audit D) Is of similar scope as an audit and adds similar credibility to the statements. 3) The sequentially-numbered pronouncements issued by the Auditing Standards Board 3) over a period of years are known as: A) Auditing Statements of Position (ASPs). B) Statements on Auditing Standards (SASs). C) Statements on Auditing Principles (SAPs). D) Accounting Series Releases (ASRs). 4) The risk that a company's financial statements will materially depart from generally 4) accepted accounting principles is referred to as: A) Control Risk. B) Detection Risk. C) Business Risk. D) Information Risk. 5) Which of the following is least likely to be included as a titled section in a standard 5) unqualified public company audit report? A) Critical audit matters section. B) Basis for opinion section. C) Management responsibilities section. D) Opinion section. 6) 6) Which of the following best describes a portion of the auditors' responsibility regarding noncompliance with laws by clients? A) If audit procedures reveal noncompliance, the auditors should take appropriate actions. B) The auditors have a responsibility to discover all material noncompliance.6. Calculations. You must show your work to receive credit for your answer. a. Lisa would like to calculate her human life value. She estimates her average annual income the next 12 years will be $90,000. Of this amount, 55 percent will be used annually to pay income taxes, social security taxes, insurance premiums, and for her own personal expenses. The other 45 percent will be available to support her family. Assuming an interest rate of 5 percent and considering the next 12 years, what is Lisa's human life value? (1.5 points, listing calculator inputs is considered showing your work)