Finance Unit 3 Questions

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Finance
Unit 3 Assignment
Answer 15 questions

[All Answers must be submitted in the form at the end of this test. No Exception]

1.Based on the following data, would you recommend buying or renting?

|Rental Costs |Buying Costs | |Annual rent, $7,380 |Annual mortgage payments, $9,800 ($9,575 is interest) | |Insurance, $145 |Property taxes, $1,780 | |Security deposit, $650 |Insurance/maintenance, $1,050 | | |Down payment/closing costs, $4,500 | | |Growth in equity, $225 | | |Estimated annual appreciation, $1,700 |

Assume an after-tax savings interest rate of 6 percent and a tax rate of 28 percent.

2.Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation (see Exhibit 9-8):

Monthly gross income, $2,950

Down payment to be made, 15 percent of purchase price

Other debt (monthly payment), $160

Monthly estimate for property taxes and insurance, $210, 30-year loan at 8 percent.

3.Based on Exhibit 9-9, what would be the monthly mortgage payments for each of the following situations?

a.A $40,000, 15-year loan at 11.5 percent.
b.A $76,000, 30-year loan at 9 percent.
c.A $65,000, 20-year loan at 10 percent.

What relationship exists between the length of the loan and the monthly payment? How does the mortgage rate affect the monthly payment?

.

4.Which mortgage would result in higher total payments?

Mortgage A: $985 a month for 30 years, or

Mortgage B: $780 a month for 5 years, and $1,056 for 25 years

5.Kelly and Tim Jones plan to refinance their mortgage to obtain a lower interest rate. They will reduce their mortgage payments by $456 a month. Their closing costs for refinancing will be $1,670. How long will it take them to recover the cost of refinancing?

6.You estimate that you can save $3,800 by selling your own home rather than using a real estate agent. What would be the future value of that amount if invested for five years at seven percent?

7.Most home insurance policies cover jewelry for $1,000 and silverware for $2,500 unless items are covered with additional insurance. If a family had $3,500 of jewelry and $3,800 of silverware stolen, what amount of the claim would not be covered by insurance?

8.What amount would a person with actual cash value (ACV) coverage receive for two-year-old furniture destroyed by a fire? The furniture would cost $1,000 to replace today and had an estimated life of five years.

9.What amount would it cost an insurance company to replace a family’s personal property that originally cost $18,000? The replacement costs for the items have increased 15 percent.

10.If Carissa Dalton has a $130,000 home insured for $100,000, based on the 80 percent coinsurance provision, how much would the insurance company pay on a $5,000 claim?

11.For each of the following situations, what amount would the insurance company pay?

a.Wind damage of $785; the insured has $500 deductible.

b.Theft of a stereo system worth $1,300; the insured has a $250 deductible.

c.Vandalism that does $375 of damage to a home; the insured has a $500 deductible.

12. Becky Fenton has 25/50/10 automobile insurance coverage. If two other people are awarded $35,000 each for injuries in an auto accident in which the insured was judged at fault, how much of this judgment would insurance cover?

13.Kurt Simmons has 50/100/15 auto insurance coverage. One...
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