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 InsuranceHealth Careo USA SPENT 2,600,000,000,000 on Health care!o 8,233.00 Per persono Annual premium was 15,745(family) and 5,615(single)o Per Month: 1,312.08(family) and 467.92 (single)- Types of Health Careo Basic health insurance, Major medical expense insurance, Dental and Eye, Dread disease and accident Insuranceo 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, andX-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 policyo Dental and Eye Covers eye exams, glasses, contact lenses, dental work, and dentures Normally expensive unless it is provided by an employero Dread Disease and Accident Insurance Covers only specific illness or accidents A set dollar amount for reimbursement- Health Care Providerso Private Health Care Plans Fee-for-service/ traditional indemnity plans- Provides the greatest choices of doctors- Coinsurance-%- Co-payment or - Insurance covers potential riskso In insurance Risk is An Uncertainty with respect to economic losso Ways to deal with RISK: risk avoidance, loss prevention, risk assumption, and Insuranceo Insurance: Shared risk (more than one is liable for damages)- Risk is the possibility of experiencing harm, suffering, danger, or lossChapter 10 Property and Liability Insurance (AUTO)- Termso Liability Insurance: protects against the financial consequences from the insured’s responsibility for property losses or injuries to otherso 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 losseso Premiums: The Monthly payment you pay for your insurance coverage- Liability Coverageo Covers bodily injury losseso Covers property damage o Covers losses due to lawsuito Can be combined with a single limit or split-limit coverageo THE MINIMUM COVERAGE- Medical Expenses Coverageo Covers all reasonable medical costs and funeral expenses incurred by the insured or the insured’s family members within 3 years - Uninsured Motorist’s Protectiono Coverage if injured by an uninsured motorist or a hit-and-run drivero Other driver MUST be at fault to collecto Also covers cots in excess of the other driver’s liability is insufficient- Comprehensive Physical Damage Coverageo Covers Collision loss and damages other than collision or comprehensive physical damageo Collision covers regardless of fault! - NOT Insured: o Intentional Injuries/damageso Use without permissiono Vehicle has less than 4 wheelso Individual not listed on policyo Carrying passengers for freeo Race/contest- “No Fault” Insuranceo ONLY available in no fault stateso Insurance pays for yours & their losses no legal battle- GAP insuranceo Coverage that pays for the difference b/w the vehicle’s value and what you may still owe on the loam- Determining the Cost of Auto Insuranceo Type of automobileo Use of the automobileo Your driving record o Where you liveo & Discounts- Filing a Claim: o Get HELP for the injured- DUI will lasts for 3 yearsChapter 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 matureso 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 1BEGINNING VALUE N- 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 riskType 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 quicklySources 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 - 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- Unsystematic Risk: Risk from one particular investment and can be reduced through diversification- Diversification: # of different types of securities owned reduces risk! Chapter 12 Securities Market- Security: Investment instrument issued by an
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