UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGNCollege of BusinessD E P A R T M E N T O F F I N A N C E Finance 230 Sample Second ExamFor the first three (3) questions, assume that you have the State Farm Car Policy handed out in class, including the coverages and limits shown on the Declarations page. Also assume that the 2001 Sebring is the only car you own, unless the question indicates that you purchase another vehicle, and that any situations involving borrowing cars is done with permission, unless otherwisestated. For each situation, calculate how much your insurance policy would pay, in total. Unless otherwise indicated, assume the loss occurs during the policy period. Do not assume facts not given in the question.1) You borrow your neighbor's car to run an errand. Your neighbor has his own insurance with Progressive with the same coverages and limits you have on your car. While driving your neighbor's car, you run into a limousine carrying seven people. Each of these people sues you and wins a bodily injury award of $50,000. The limo is totaled. It was worth $150,000 and you are held liable for the entire loss. You are also injured in the accident and incur $50,000 in medical bills. A) 0B) $100,000C) $125,000D) $425,000E) None of the above2) On October 14, 2005, you buy a new 2006 Lexus to replace your Sebring. You forget to tell State Farm about this change until you have an accident on December 3, 2005. In the accident you lose control of the car and run into a house. It costs $38,000 to repair the Lexus (the ACV was $40,000) and $22,000 to repair the house. A) 0B) $22,000C) $37,900D) $59,900E) None of the above3) Your son, who lives with you, has his own car and carries liability with 50/100/25 limits, and uninsured motor vehicle coverage and underinsured motor vehicle coverage, both with 50/100 limits with Travelers on his own policy, but no other coverages. Your daughter, who also lives with you, borrows your son’s car one night and gets a flat tire while driving on I-57. Unfortunately, your son's car does not have a spare tire. A tow truck comes to help your daughter out. It charges $100 for a new tire and $50 to put the tire on the car. A) 0B) $50C) $100D) $150E) None of the above For the next (2) questions, use the coverages described in the 2005-2006 U of I Student Health Insurance Plan for Undergraduates to determine how much your student health policy will pay in the following situations, and assume the following:1. The average semi-private room and board rate charged by each hospital is $500.2. All treatments are medically necessary.3. Unless otherwise indicated, all charges are considered to be the Usual and Customary fees.4. Each situation is the only claim you have ever had while insured under this Insurance Plan.5. All treatment is provided by plan provider hospitals or facilities and licensed providers6. Unless otherwise indicated, each loss occurred during the academic year.4) You visit a doctor for a severe pain in your back. The doctor prescribes medicine and ultrasound treatments. You are billed $100 for the visit to the doctor, $50 for the medicine and $300 for the ultrasound treatments. A) 0B) $160C) $200D) $250E) None of the above5) You are seriously injured while bungee jumping. You are hospitalized for twenty days andundergo surgery. You are billed $500 per day room and board, $10,000 for the operating room, $6,100 for surgical dressings and $15,000 for the surgery. A) 0B) $32,800C) $36,000D) $39,000E) None of the above6) Which of the following costs incurred by a plaintiff in a bodily injury claim would represent general damages?I Hospital bills II Pain and suffering III Loss of wagesIV Punitive damagesA) I onlyB) II onlyC) I and IIID) II and IVE) None of the above7) Based on the discussion in class, how can making a mistake with life insurance be fatal?A) If you don’t have life insurance when you dieB) If you forget to pay the premiums when they are dueC) If you lie on your application, and die in the first two years of the policyD) If you name the wrong person as beneficiaryE) None of the aboveFor the next two questions, refer to the following whole life policy for a 35 year old male (at the time he purchased the policy):Face Amount $500,000Annual Premium 7,500Dividends in year 10 4,000first 10 years in total 21,000Cash Valuesend of 9th year 50,000end of 10th year 57,000Accumulated Value of Dividends at the end of 10 years at 6% 40,0008) What is the 10 year traditional net cost index per $1,000 of coverage?A) -4.40B) -0.60C) -0.30D) 1.11E) None of the above9) What is the 10 year interest adjusted net payments cost index per $1,000 of coverage based on a 6 percent interest rate?A) -0.30B) 1.11C) 7.29D) 9.27E) None of the above10) What is the 10 year equivalent level annual dividend per $1000 of coverage based on a 6 percent interest rate? A) 0B) 3.01C) 5.73D) 8.00E) None of the above11) Why might it be more useful to consider life insurance surrender cost comparisons for a 17year period rather than a 20 year period?A) Companies are more likely to manipulate cash values for a common comparison periodB) Figures show that policyholders are more likely to surrender a policy after 17 yearsthan after 20 yearsC) After 17 years most people no longer need life insuranceD) Due to the impact of interest rates, payments after 17 years are not considered significantE) None of the aboveFor the next three (3) questions, please consult the whole life insurance policy of John Doe, located in Appendix E, and the chapters on life insurance in the textbook. To simplify the calculations, assume that John Doe has selected the Premium Payment option for dividends (item 4.2 on page 741), and ignore the Premium Refund at Death provision (the last point under item 3.1 on page 741) and the Dividend at Death provision (item 4.4 on page 741). Note that provision 1.4 on page 740 does apply. Unless otherwise indicted, he has made all premium payments when due and kept the policy in force until his death.12) John Doe keeps his life insurance policy in force until August 1, 2006, and then selects the extended term insurance option. If he dies in a boating accident on July 4, 2030, how much will his wife Jane receive from the insurance company?A) 0B) $40,600C) $100,000D) $200,000E) None of the above13) John Doe terminates his life insurance policy on August 1, 2013, and selects the paid-up insurance option. He