Personal Finance Assignments

PERSONAL FINANCE ASSIGNMENTS

LIFE INSURANCE

1. Denise Gill is a 33 year old non smoker. What will her annual premium be for a $100,000 10 year term life insurance policy?

2. Kevin Wong is 30 years old and smokes. Calculate his annual premium for a $50,000 whole life policy.

3. Harry and Sally Heller are both 25 years old, and non smokers. They each decide to purchase $200,000 whole life insurance policies. a) Find the monthly premium each will have to pay. b) Why does Harry have to pay more than Sally?

4. Howard was 25 years old when he bought an $80,000 whole life insurance policy. At the age of 60 he decided to cancel his policy and take the cash surrender value. a) How much money can he expect back? b) List 2 reasons why someone might choose term life insurance instead of whole life, and 2 reasons why they might choose whole life instead of term life.

5. Luen is comparing the insurance costs of smokers and non smokers. He selects a 27 year old male and picks $300,000 insurance over a 10 year term. a) Find the annual premium for a smoker and a non smoker. b) What is the difference in the premiums?

6. Malvina is a 25 year old smoker. What is her semi annual premium for $270,000 of whole life insurance?

7. A man buys a $60,000 10 year term life insurance policy when he is 28. If he dies when he is 39 how much will his beneficiary collect?

8. Twin girls have decided to purchase $260,000 of life insurance on their twentieth birthday. One buys 10 term life insurance, while the other decides to purchase whole life insurance. Both are non smokers. a) Determine the total cost of premiums that each would pay over 40 years. b) Find the cash surrender value after 40 years. c) Which twin selected the better coverage? Explain your reasoning. HOMEOWNER’S INSURANCE

1. Ian Harding is renting an apartment. His possessions are worth $60,000. He wants a Tenants Package Policy with a $500 deductible. Find his annual premium. 2. Sam Smith's house is located in Area 3, 8 km from the nearest fire hall. The building is worth $165,000. He wants to purchase a comprehensive policy with a $200 deductible. Find his annual premium.

3. Henrietta has built her dream home just outside the city, but within 300 metres of a fire hydrant. The home is worth $210,000. She would like to get Standard coverage, but with a $200 deductible. Find her annual premium.

4. A property is insured for $100,000 with a $200 deductible. A fire damages the roof and collapses the garage. It will cost about $75,000 to repair the damage. How much money can the owner expect to receive from the insurer?

5. Catherine bought a home 9 km from town in area 4. She wants to insure the property and her belongings. The home is worth $140,000. Catherine would like to have standard coverage with a $500 deductible. Find her annual premium.

6. A property is purchased for $180,000 including the building and the land. Explain why the insurance company will only insure the property for $125,000.

MORTGAGE CALCULATIONS

1. Find the monthly payments on the following mortgages: a) $50,000 at 5.5% over 15 years b) $85,000 at 6.5% over 25 years c) $182,500 at 7.5% over 15 years d) $78,380 at 6.0% over 10 years

2. Kevin is considering purchasing a condo for $149,750. He has $55,500 saved for a down payment. The credit union is offering him a mortgage at 5.5% over 20 years. Find his monthly payment.

3. A $70,000 mortgage was offered by a loans officer at a rate of 6% over 20 years. How much interest would be paid over the life of the mortgage?

4. Explain why you might consider taking out a mortgage with a higher monthly payment over a shorter amortization period.

5. List two advantages to getting a variable rate mortgage rate and two for a fixed mortgage rate. Which would you recommend and why? GROSS DEBT SERVICE RATIO

1. Glen wants to buy a house with a mortgage payment of $627.50. His gross monthly earnings are $3,100. He estimates the monthly heating costs to be $175, and the monthly property tax to be $185. Calculate his Gross Debt Service Ratio.

2. Lynne earns an income of $3,500 per month. She has saved $55,500 for a down payment on a home costing $215,800. The heating costs will be about $220 per month, while the monthly property tax bill is $235. If she negotiates a mortgage at 4.5% over 20 years, calculate her GDSR.

3. Paul has a monthly income of $3,700. His mortgage payment is $650 per month. He estimates the annual heating costs to be $2,520. Annual property taxes are $2,200. Calculate his GDSR.

4. Lorna has $22,000 saved up for a down payment. The bank is offering her a mortgage at 6% over 25 years. Her monthly gross income is $2,950. Assuming the heating bills will be $110 per month and the monthly property taxes $140, find the maximum amount of a mortgage the bank is willing to allow.

5. List two possible reasons explaining why banks will not allow customers to budget more than 32% of their gross income on household expenses. PERSONAL FINANCE REVIEW

1. A 36 year old female non smoker takes out a 10 year term life insurance policy with a face value of $300,000. a) Calculate her annual premium. b) How much will she pay in premiums in the first 4 years of the policy? c) If she dies after 4 years, how much money will her beneficiary receive? d) If she dies at age 47, how much money will her beneficiary receive?

2. Karl is a 25 year old non smoker. He is interested in purchasing a whole life insurance policy with a face value of $320,000. a) Calculate his annual premium. b) Calculate his premium if he chooses to pay semi annually. c) Calculate the cash surrender value if he holds the policy until he is 50. d) Calculate both the total annual and total semi annual premiums that Karl would have paid during this period.

3. Rob purchased a home for $102,500. He is able to make a down payment of $30,000 on the home, with the balance from a fixed rate mortgage at 7.5%. The mortgage is to be ammortized over 15 years. a) Find Kevin's monthly mortgage payments. b) Calculate the amount of interest Kevin will pay over the life of the 15 year period.

4. The Singh family is considering buying a bungalow in Winnipeg with a purchase price of $389,000. They have saved a down payment of $90,000. The family's gross monthly income is $7,480. They have secured a 7.5% mortgage over 15 years from their credit union. The annual taxes on the property are $2,065, and the annual heating costs total $1,450. a) Calculate their GDSR. b) Will the credit union approve the mortgage for the Singhs?

5. Louise rents an apartment in Flin Flon. Her personal possessions have a value of $35,000. Louise chooses a comprehensive tenants insurance policy with a $200 deductible. Calculate her annual insurance premium.

6. Victor owns a home in Area 3 out at Schist Lake worth $220,000. He is interested in purchasing a standard homeowner's policy with a $200 deductible. Find his annual property insurance costs.

7. List and describe 5 additional costs to purchasing a home.

8. Name 4 factors which effect premiums you pay for homeowner's insurance.