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 First Exam1) Which guest speaker stated that common sense was an important skill for an underwriter? A) Dean Turner B) Kenney DavenportC) Jeff MyersD) Jeff BrownE) Sue Myers2) According to Dean Turner, which of the following would be considered “soft” fraud?I Exaggerated claims II Staged accidentsIII ArsonIV Fake theftsA) I onlyB) I and IIC) I and IVD) II, III and IVE) II and IV For the next eight (8) 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 situation involving borrowing cars is done with permission, unless otherwise stated. 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.3) You are driving your car when you lose control and run into a telephone pole. You are injured in the accident. Your medical bills are $21,000. It costs $6,000 torepair your car. A) 0B) $25,000C) $26,900D) $27,000E) None of the above4) You are driving your spouse's car when you hit a pedestrian. Your spouse has insurance with Allstate with the same coverages and limits you have on your car. The pedestrian sues you and wins a bodily injury award of $160,000. A) 0B) $60,000C) $100,000D) $160,000E) None of the above5) Your 28 year old daughter, who does not live with you, borrows your car. While driving it, she is hit from behind by an uninsured driver and seriously injured. She incurs $60,000 in medical bills and would be entitled to a $200,000 bodily injury award if the other driver had been insured. A) 0B) $25,000C) $60,000D) $125,000E) None of the above 6) Your car is stolen. You immediately report the loss to the insurance company. You rent a car that costs $25 per day. Your car is never recovered. State Farm offers to pay you for the loss 6 days after it was stolen. The ACV of your car was $12,000. A) $11,900B) $12,000C) $12,064D) $12,150E) None of the above7) You are walking though a parking lot when you are hit by a car and seriously injured. The driver only carries 20/40/15 liability coverage. You incur $20,000 inmedical bills and would be entitled to a bodily injury award of $75,000.A) 0B) $20,000C) $25,000D) $75,000E) None of the above8) Your 12 year old son, who lives with you, is getting out of your car one day when he trips over the curb and breaks his ankle. He incurs $35,000 in medical bills. A) 0B) $25,000C) $35,000D) $100,000E) None of the above9) You borrow your neighbor's car. Your neighbor has insurance coverage with GEICO, but only has liability coverage with 50/100/25 limits. You lose control ofthe car and run into a tree. It costs $14,000 to repair your neighbor's car. The ACV of the car is $12,000.A) 0B) $11,900C) $13,900D) $14,000E) None of the above10) Your 16 year old son, who lives with you, is driving your car when he runs out of gas. He calls a service station that delivers 3 gallons of gas. The gas costs $5. The service station charges $25 for delivering the gas.A) 0B) $5C) $25D) $30E) None of the above11) An insurance company with a complaint ratio of 1.00 means: A) It is insolventB) One complaint has been filed for every 1000 policies issuedC) Every complaint that has been filed has been a valid complaint D) One complaint has been filed for every $1 million of premiums writtenE) None of the above12) For which rating agency would a rating of B be acceptable for a conservative insurance buyer? A. A. M. Best B. Duff & PhelpsC. Moody'sD. Standard and Poor'sE. Weiss13) Constructing a guard rail between your new garage and the parking lot of the tavern next door represents which of the following methods of handling pure risk?A. AvoidanceB. Loss controlC. RetentionD. TransferE. None of the above 14) After viewing the Blair Witch Project you decide to buy insurance against a witch casting a spell on you. Unfortunately, you are unable to find a company willing toinsure you for this peril. Which ideal requisite for insurability is most seriously violated by this coverage? A. Large number of exposure unitsB. Fortuitous lossesC. Catastrophe unlikelyD. Definite lossesE. Speculative losses15) A 12 year old girl cannot be held to a contract she signed with a modeling agency because which requirement of a contract would be violated?A. Offer and acceptanceB. ConsiderationC. Competent partiesD. Legal purpose E. None of the above16) On page 5 of the State Farm Car Policy, the policy states, "The insured must give us or one of our agents written notice of the accident or loss as soon as reasonablypossible." Which part of the contract is this statement? A. DeclarationsB. Insuring clauseC. ExclusionsD. ConditionsE. EndorsementsFor the next (4) questions, use the coverages described in the 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.17) You are hospitalized for 50 days for a psychiatric condition. You are billed $500 per day for room and board. Your psychiatrist visits you once each day during your stay. You are billed $100 per visit. A. 0B. $20,000C. $24,475D. $26,900E. None of the above18) You visit a doctor for a routine physical exam. The doctor takes x-rays and performs some lab tests. You are billed $100 for the visit to the doctor, $300 for the x-rays and $200 for the lab tests.A. 0B. $80C. $320D. $480E. None of the above 19) You fall off a curb and hit your head, knocking yourself unconscious. An ambulance is called to take you to the emergency room. At the emergency room, you have a CT scan and are found to be okay. You are billed