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 Assignment 2Fall, 2007 Due: September 7, 2007For the following questions, assume that you have the State Farm Car Policy handed out in class, includingthe coverages and limits shown on the Declarations page. 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 are driving your car to the football game when you are hit by an uninsured driver from Western Illinois. Fortunately you are not hurt, but your car is damaged and does not run. You immediately report the loss to your insurance company. It takes four days and costs $5,100 to repair your car. While your car is being repaired, you rent a replacement vehicle that costs $35 a day. Your policy will pay:A. $5,000 B. $5,100 C. $5,140D. $5,240 E. None of the above2. While walking to class, you are hit by a car and seriously injured. You incur $15,000 in medical bills. You are entitled to collect a bodily injury award of $150,000, but the driver is not insured. Your policywill pay:A. $15,000 B. $100,000 C. $115,000D. $125,000 E. None of the above3. You are driving to Indiana to see the Illini football game when you see a driver going the wrong way onI-74 coming straight at you. You swerve to avoid a collision and lose control of your car. Your car goes off the road and rolls over several times. Since you were not wearing your seatbelt (your bad) youare thrown from the car and severely injured. You incur $50,000 in medical bills, and would be entitledto a $250,000 bodily injury award against other driver, but he did not stop and is never identified. It costs $10,000 to repair your car; the Actual Cash Value of your car was $9,100. Your policy will pay:A. $9,000 B. $34,000 C. $134,000D. $259,900 E. None of the above4. You are driving your car in Urbana, with two friends as passengers, when you are hit from behind by a drunk, uninsured driver. You are all injured. You incur $40,000 in medical bills and are entitled to a $90,000 bodily injury award against the at fault driver. Each of your friends incurs $20,000 in medicalbills and is entitled to a $60,000 bodily injury award. Your policy will pay:A. $25,000 B. $65,000 C. $130,000D. $210,000 E. None of the above5. While driving your car in Mexico, 10 miles from the U. S. border, you are hit by a driver with only 10/20/5 liability limits. The accident is the fault of the other driver. You are injured and your car is damaged. You incur $10,000 in medical bills. You are entitled to a $25,000 bodily injury award. It costs $2,100 to repair your car. Your policy will pay:A. 0 B. $10,000 C. $15,000D. $17,000 E. None of the above6. You are sitting in your car at a stop sign in Champaign, when someone runs into the back of your car. You were not wearing your seatbelt and end up smashing through your windshield, incurring permanentbrain damage. You incur $200,000 in medical bills. You are entitled to a bodily injury award of $500,000 and a property damage award against the other driver. It costs $5,100 to repair your car. The other driver only carries 50/100/25 liability limits. Your policy will pay:A. 0 B. $30,000 C. $75,000D. $130,000 E. None of the above7. You are driving your car in Illinois when you run into the back of a bus, causing it to leave the road and land in a ditch. Ten people on the bus are injured, and each wins a bodily injury award against youfor $50,000. It costs $140,000 to repair the bus and $8,100 to repair your car. A. $158,000 B. $408,000 C. $608,000D. $648,000 E. None of the above8. You are playing golf one day up in Chicago when a 10 year old girl driving a golf cart for her parents accidentally runs over your foot. Trying to be polite, you tell the family, whom you do not know, that you are fine. However, the next day your foot hurts so badly that you have to go to the doctor. It turnsout your toe is broken. You incur $15,000 in medical bills. You would be entitled to a $30,000 bodily injury award if you could find the people involved, but you never find out who they were. A. 0 B. $15,000 C. $25,000D. $30,000 E. None of the above9. According to Todd Hart, the guest speaker on August 24, what does the term “underwriting” mean?A. Risk assessment B. Strategic planning C. Policy reviewD. Profitability analysis E. Providing equity capital 10. According to Todd Hart, the guest speaker on August 24, what proportion of cars in the state of Illinoisdoes State Farm insure? A. 1 in 10 B. 1 in 5 C. 1 in 3D. 1 in 2 E. None of the