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 EFinance 230 Assignment 10Fall, 2007 Due: November 9, 2007For the first nine questions on this assignment, assume that you have both the Homeowners Policy described in Appendix A of your textbook and the State Farm Car Policy, including the Declarations page, handed out in class.For the Homeowners Policy, assume the policy limits exceed 80% of the replacement cost of the house. Also, use the following information as a sample Declarations page for the Homeowners Policy:Type of Coverage Limit of LiabilityCov A - Dwelling $100,000Cov B - Other Structures 10% of Coverage A limitCov C - Personal Property $50,000Cov D - Loss of Use Actual Loss SustainedCov E - Personal Liability (per occurrence) $100,000Cov F - Medical Payments (per person) $1,000Policy Deductible for Section I - Property Coverages $250For each question, indicate how much both policies, in total, will pay.1. One evening, while you are stargazing, a meteor crashes into your attached garage. It costs $15,000 to fixthe garage, $20,000 to repair your spouse’s car (ACV $9,000), and $5,000 to repair your boat (ACV $2500). A. 0 B. $16,000 C. $17,250 D. $24,750 E. None of the above Explanation: Your garage is covered by dwelling, your spouse’s car is not covered, and your boat is covered under personal property. This is what the calculations look like:Dwelling Personal Property Total$15,000 → garage $2,500 → ACV boat $15,000 → Dwelling- 250 → deductible + 1,000 → Personal Property$2,250 $16,000 → Total ↓$1,000 → Limit of liability (boat)2. An unidentified driver runs over some of your bushes in front of your house and crashes into your garage door. You never find out who did this. It costs $500 to replace the bushes and $600 to repair your garagedoor. A. 0 B. $350 C. $600D. $850 E. None of the aboveExplanation: You bushes are covered by loss of sue, and your garage door is covered by dwelling. This is what the calculations look like:Loss of Use Dwelling Total$500 → bushes $600→ garage door $500 → Loss of Use-250 → deductible +350 → Dwelling$350 $850 → Total3. You are working at a grocery store part-time. Early one morning, you are mopping an aisle. Before you can setup your caution sign, an elderly man walks down the slippery aisle and falls and breaks his hip. This man sues you and wins a bodily injury award of $135,000. A. $1,000 B. $99,750 C. $100,000D. $135,000 E. None of the above ($0)Explanation: The answer to this problem is E ($0). You are working at the grocery store when the elderly is injured. Therefore, exclusion 1.b. on page 678 applies because the bodily injury arose out of the work/business you were engaged in. 4. You go on vacation for a week in the winter. When you return home, you find that the large snows have caused part of your roof to cave in, damaging some furniture stored in your attic. It costs $6,500 to repair your roof, and $3,200 to replace your furniture (ACV $1800). A. $0 B. $7,600 C. $8,050D. $9,350 E. None of the above Explanation: Your roof is covered by dwelling, and your furniture is covered by personal property in this problem. This is what the calculations look like. Dwelling Personal Property Total$6,500 → roof $1,800→ ACV furniture $6,500 → dwelling- 250 → deductible +1,550 → personal property$1,550 $8,050 → Total5. A river near your house overflows its banks, destroying your home, your personal property and your car. It costs $108,000 to rebuild your home (ACV $90,000). It costs $45,000 to replace your personal property (ACV $35,000). It costs $15,000 to replace your car (ACV $9,100). While rebuilding your house, you rent an apartment for 6 months for $750 per month. You rent a car for 10 days at $30 a day until you buy a new car. A. $0 B. $9,100 C. $138,350 D. $148,600 E. None of the aboveExplanation: Your car is the only item that is covered, due to your auto policy’s comprehensive coverage. Your car rental is not covered because your car did not incur its loss due to theft. Also, your home, your personal property, and your rent for 6 months are not covered because flooding under exclusion 1.c.(1) on page 674 applies. This is what the calculations look like.State Farm$9,100 → ACV car 6. One day someone enters your home by breaking and entering through a basement window. They take $75,000 in stamps, $4,000 in furs and $2,500 in cash from under your mattress. They also break your $3,500 rifle in half, which makes it a total loss. It costs $350 to repair the window. A. $5,800 B. $6,050 C. $9,050D. $50,350 E. None of the above Explanation: Your stamps, furs, cash, and rifle are covered by personal property, while your window is covered by dwelling. This is what the calculation look like.Personal Property Dwelling Total$75,000 → stamps $350 → window $5,700 → personal property- 250 → deductible + 350 → dwelling$74,750 $6,050 → Total ↓$1,000 → limit of liability (stamps)+1,000 → limit of liability (furs)+ 200 → limit of liability (cash)+3,500 → rifle (no special limit since the loss was not by theft)$5,7007. While trying to back your car out of your attached garage, you accidentally put the car in drive and run into the front wall of the garage and into your living room. It costs $12,000 to repair the wall, $1,500 to replace your living room couch (ACV $500) and $4,000 to repair your car.A. 0 B. $3,900 C. $12,250D. $16,400 E. None of the above ($16,150)Explanation: Your wall is covered by dwelling, your living room couch is covered by personal property, and your car is covered by your auto policy’s collision coverage. This is what the calculations look like.Dwelling Personal Property State Farm Total$12,000 → wall$500 → ACV couch $4,000 → car $12,000 → Dwelling -250 → deductible - 100 → deductible + 250→Personal Property$250 $3,900 + 3,900 → State Farm$16,150→ Total 8. Your son’s puppy is especially playful. One day, while your neighbor is over for dinner, the puppy gnawson the laptop she uses for work, scattering pieces all over the house. It costs $3,250 to replace the laptop,$500 to rebuild the customer data your neighbor stored on the laptop and $250 for dog obedience lessons.Your neighbor sues you and wins a property damage award for the value of the computer and the cost to rebuild the data set. A. $250 B. $3000 C. $3,250D. $3,750