Test 3 For Spring 2013 By Jaison Varghese Goes over Chapter 9 12 health care Property Liability Insurance Investment Basics Securities Market HOPE EVERYONE GETS AN A GOOD LUCK Chapter 9 Life Health Insurance Health Care o USA SPENT 2 600 000 000 000 on Health care o 8 233 00 Per person o Annual premium was 15 745 family and 5 615 single o Per Month 1 312 08 family and 467 92 single Types of Health Care o Basic health insurance Major medical expense insurance Dental and Eye Dread disease and accident Insurance o Basic Health Insurance 3 types Hospital insurance cover hospitalization expenses such as room fees and drug fees Surgical Insurance covers direct costs of surgery such as the surgeon s fees and equipment fees Physician expense insurance covers physicians such as office fees lab fees and X ray fees o Major Medical Expenses Covers beyond basic plan Requires co payments and deductible payments Stop loss provision limits the total expenses you would have to pay to a specific amount Life time cap It is the total amount the insurance company would pay you over the life of that policy o Dental and Eye Covers eye exams glasses contact lenses dental work and dentures Normally expensive unless it is provided by an employer o Dread Disease and Accident Insurance Covers only specific illness or accidents A set dollar amount for reimbursement Health Care Providers o Private Health Care Plans Fee for service traditional indemnity plans Provides the greatest choices of doctors Coinsurance Co payment or Insurance covers potential risks o In insurance Risk is An Uncertainty with respect to economic loss o Ways to deal with RISK risk avoidance loss prevention risk assumption and Insurance o Insurance Shared risk more than one is liable for damages Risk is the possibility of experiencing harm suffering danger or loss Chapter 10 Property and Liability Insurance AUTO Terms o Liability Insurance protects against the financial consequences from the insured s responsibility for property losses or injuries to others o Comprehensive full coverage You have to have it if you have a loan on your vehicle You must insure against liability and for the value of vehicle itself o Deductible The limit what a company must pay for small losses o Premiums The Monthly payment you pay for your insurance coverage Liability Coverage o Covers bodily injury losses o Covers property damage o Covers losses due to lawsuit o Can be combined with a single limit or split limit coverage o THE MINIMUM COVERAGE Medical Expenses Coverage o Covers all reasonable medical costs and funeral expenses incurred by the insured or the insured s family members within 3 years Uninsured Motorist s Protection o Coverage if injured by an uninsured motorist or a hit and run driver o Other driver MUST be at fault to collect o Also covers cots in excess of the other driver s liability is insufficient Comprehensive Physical Damage Coverage o Covers Collision loss and damages other than collision or comprehensive physical damage o Collision covers regardless of fault NOT Insured o Intentional Injuries damages o Use without permission o Vehicle has less than 4 wheels o Individual not listed on policy o Carrying passengers for free o Race contest No Fault Insurance GAP insurance owe on the loam Determining the Cost of Auto Insurance o Type of automobile o Use of the automobile o ONLY available in no fault states o Insurance pays for yours their losses no legal battle o Coverage that pays for the difference b w the vehicle s value and what you may still o Your driving record o Where you live o Discounts Filing a Claim o Get HELP for the injured DUI will lasts for 3 years Chapter 11 Investment Basics Investing Putting your money into an asset that generates returns stocks bonds mutual funds Speculation Putting your money into an asset that the future value or return relies on supply and demand Pay your Self First MUST KNOW TIME VALUE OF MONEY Investment Choices Lending Investments Bonds Ownership Investments Stocks Savings Accounts loan institutions money Bonds Loans where your rate of return is predetermined o Par value The amount you receive when bond matures o Coupon Interest Rate The interest paid annually on a bond as a percentage of par value Stocks You are PART OWNER in the corporation and receive a portion DIVIDENDS Real Estate Return is from Rent or Appreciation of the property RATE OF RETURN ENDING VALUE BEGINNING VALUE INCOME BEGINNING VALUE ANNUALIZED RATE OF RETURN ENDING VALUE BEGINNING VALUE INCOME X 1 N BEGINNING VALUE Nominal quoted rate the rate of return without adjusting for inflation Real Rate The Inflation adjusted rate of return Premiums Additional returns demanded by investors for taking on additional risk Type of Risk Premiums Inflation Risk Premium Compensation for the anticipated inflation over the life of the investment Default Risk Premium Compensation for the possibility that the issuer may not pay the interest or repay the principal Maturity Risk Premium Compensation on longer term bonds for value fluctuations in the response to interest rate changes Liquidity Risk Premium Compensation for a bond that cannot be converted into cash quickly Sources of Risk in the Risk Return trade off Interest Risk Risk from fluctuations in security prices due to changes in the market interest rate Impossible to estimate Inflation Risk Risk with rising prices will erode purchasing power closely linked to interest rate risk Almost impossible to estimate Business Risk Risk from POOR company management or product acceptance Financial Risk Risk From the company s debt Liquidity Risk Risk from not being able to liquidate a security quickly and cost effectively Market Risk Risks form the swings in the OVERALL market Unsystematic Risk Risk from one particular investment and can be reduced through Political and Regulatory Risk Risk from unanticipated changes in the tax or legal environment Call Risk Risk that a callable security may be taken back before maturity Systematic Risk Risk from ALL securities and cannot be reduced through diversification diversification Diversification of different types of securities owned reduces risk Chapter 12 Securities Market Security Investment instrument issued by an organization which offers debt or equity Primary Market The market for NEW security issues Security is purchased directly from the issuer o Initial Offerings IPO First time the company s stock is traded publicly o Seasoned New Issues New shares