Finance Test 4 Notes PDF

Short Notes for Chapter 8, 9, 10, and 17 Fourth Exam Chapter 8 (The Home and Automobile Decision) - - - - - a. b. **Open-end Lease**: **a. Residual Value Risk**: In an open-end lease, the lessee (the person leasing the asset) assumes the risk for the residual value of the leased a...

Short Notes for Chapter 8, 9, 10, and 17 Fourth Exam Chapter 8 (The Home and Automobile Decision) - - - - - a. b. **Open-end Lease**: **a. Residual Value Risk**: In an open-end lease, the lessee (the person leasing the asset) assumes the risk for the residual value of the leased asset. This means that at the end of the lease term, if the asset\'s market value is less than the predetermined residual value, the lessee must cover the difference. b\. **Flexibility**: This type of lease often offers more flexibility in terms of mileage and wear-and-tear policies compared to closed-end leases. c\. **Used in Commercial Leasing**: Open-end leases are more common in commercial leasing situations, such as for business vehicles or equipment, where usage might be unpredictable. - - Buying a Vehicle the first line of protection is the warranty. Lemon Laws: are consumer protection laws designed to help buyers of defective vehicles and other consumer goods. - - - - - - Mortgage Bankers: originate mortgage loans, sell to banks, pension funds, insurance companies and service or collect payments. a. b. c. d. - - - - **Specialty Mortgage Options**: a. b. Option Payment ARM Mortgages- can make different types of mortgage payments each month - - - - Risks associated with Specialty Mortgages: - - - - a. **Abusive Loans**: high-cost loans with little chance of paying off. Try to avoid predatory loans with the help of knowledge. **Prepayment Penalties**: Excessive fees that the borrower must pay if the loan is paid off early or refinanced. The purpose of theses prepayment penalties is to lock the borrower into the high-interest loans. Bait and Swith Costs: The cost or loan terms at closing are not what the borrower agreed to. - Life and Health Insurance: Chapter 9 - - - - a. b. - a. b. - a. b. - - - - a. b. - - a. b. c. d. e. f. g. **Term Insurance**: pure life insurance that pays the beneficiary a specific amount of money if you die while covered. **Cash-value Insurance** has a life insurance and savings plan Terms Insurance: pays the death benefit if insured dies during the coverage period. - **Cash Value Insurance and its Features**: a. b. Three basic types of it are: Whole life, Universal Life, and Variable life Whole life Insurance and Its Features: a. b. c. Universal Life Insurance and its Features a. b. c. d. **Term Insurance Versus Cash-Value Life Insurance** For most individuals, terms insurance is the better alternative. a. b. Cash Value Insurance has tax Advantages: a. b. **Contract Clauses** Beneficiary provision, Coverage grace period, Loan Clause, Nonforfeiture clause, Policy reinstatement clause, change of policy clause, Suicide clause, Payment premium clause, Incontestability clause. **Riders**: Waiver of premium for disability rider, Accidental death benefit rider or multiple indemnity, guaranteed insurability rider, cost of living adjustment rider, living benefits rider **Settlement or Payout Options** **Lump Sum settlement**: settlement is a one-time, full payment made to settle a claim or debt, rather than spreading the payment out over time through installments. **Interest Only settlement** is a type of life insurance settlement option where the insurance company holds the principal amount of the death benefit and pays out only the interest earned on that amount to the beneficiary. **Installment payment settlement** is a type of financial arrangement where the amount owed or the benefit received is paid out in regular installments over a specified period, rather than as a lump sum. **Life Annuity Settlement**: is a financial product that provides a stream of income payments to an individual for the rest of their life. When you're buying a life insurance plan, try to buy an efficient insurance company that will be around when your policy matures, and select a good agent. **Comparing Costs**: a. b. Patient protection and Affordable Care Act of 2010 ensures most Americans have health insurance. - **Increasing Access to Affordable Care**: - - - - **Private Health Care Plan**: a. b. Manges Health care- provided or offered by health maintenance organizations (HMOs) a. b. Private Health Care Plans (HMOs): a. b. c. HMO's are cost efficient, service can be very quick while waiting too long, lack of choices can be too restricting. PPO (preferred Provider Organization): Cross between traditional fee-for-service plan and an HMO. a. b. **Group Versus Individual Health Insurance**: 1. 2. The Affordable care Act requires certain benefits, such as Ambulatory patient Services, Emergency, Hospitalization, Maternity and Newborn care, Mental Health Substance abuse disorder services, prescription drugs etc. Government Sponsored Health Care Plans: a. b. Medicare: Part A, Hospital Insurance. Part B, Supplemental Medical Insurance Part C, Medicare Advantage Plans, Part D, Medicare prescription Drug Coverage Medigap Plans; **Medicaid**: Government medical insurance plan for needy families- as well as aged, and disabled. - - - **Controlling Health Care Costs**: a. b. c. d. Controlling Health Care Costs: - - **Choosing an Insurance Plan**: a. b. c. d. e. **Disability Insurance**: is the insurance that provides payments to the insured in the even that income is interrupted by illness, sickness, or accident. Anyone who relays on income from a job needs disability insurance - - **Sources of Disability Insurance**: a. Disability Features that Make Sense a. Long Term Care Insurance: a. b. c. Long Term Health-care Provisions Necessary: Consider only high-quality insurance companies with either an A11 or A1 rating from A.M. Never consider TV-celebrity advertised. - - - - a. - - - - - - - - - - - - - - - - a. b. Comparisons of Homeowners Insurance Policies: HO-1 (Basic Form)- Provide such very narrow coverage that It isn't available in most states. a. b. c. d. e. f. Covered perils: Riot or civil commotion, volcanic eruption, Smoke, Explosion, Glass Breakage, Vehicles, Windstorm or hail, Theft, and Aircraft. **HO-2 (Broad Form)** A named perils form of insurance. This policy cost is typically 10% more than HO-1 coverage. A, B, C, E, and F coverage is the same as HO-1 D. Loss of use: 20% of insurance on house Covered perils same as HO-1, plus A, falling objects, weight of ice, snow, sleet, weight of ice, snow, or sleet, **HO-3 (All risk form):** Covers all direct physical losses to your home. And typically cost 10-15% more than an HO-1 policy. **HO-4 (Renter's Form)**- Aimed at renters or tenants and covers personal belongings but does not include liability insurance. **HO-6 (Condominium Form)** provides personal property and liability insurance for co-op or condominium owners. a. **HO-8 (Older Homes Form)-** Designed for older homes, insuring them for repair cots or actual cash value rather than replacement cost. a. b. c. d. e. Covered perils: same as HO-1 Property Coverages: A. Personal Liability: protects policyholders if someone is injured as well as covers medical expenses of anyone hurt by policyholder, their family or pet. **Endorsement**: is a written attachment to an insurance policy to add or delete coverage. Personal Umbrella Policy: is designed to protect your assets. **Coinsurance and the 80 percent Role**: a. b. The Bottom Line: - Keeping your costs Down- Insurance Credit Scoring - Factors that are going to affect the cost of your insurance - - - **Direct writer** is an insurance agent or company that sells policies issued by only one insurance company. Making your Coverage Work: a. b. c. d. a. b. c. **Getting Automobile Insurance Discounts**: You can reduce the cost and price of your insurance with the below steps: a. b. c. d. e. f. g. Buy a car that is typically inexpensive to ensure. If you believe that the other driver is under the influence, try to request for alcohol test - - - - Chapter 17 (Financial Life Events -- Fitting the Pieces Together) **The ingredients of Success:** - - - - - Women and Personal Finance - a. b. c. d. Financial Life Events a. Financial Life event: Step 1: Manage your life (Delete Incriminating photos from social media, Invest in yourself, Be able to describe what you do. Step 2: Lay the Groundwork, track expenses and create budget, control your debt, Establish an emergency fund, Insure yourself, control your credit score, keep current on personal finance. Step 3: Identify your financial goal, set a time frame, Identify the costs of your goals, and revisit your goals annually Step 4: **Begin Savings for your goals**, save more than you think you can, make savings automatic, avoid expenses whenever you can, Don't procrastinate, and catch your matches. Begin a Roth IRA, Know your risk capacity and tolerance, pay attention to asset allocation, put together a strategy and control your spendings. Step 5: Manage your Portfolio, Monitor your portfolio, stay current, and Adjust to change **Life Event**: a. b. c. d. Alternatives to Finance your Illness: a. b. c. Retiring a. b. c. **Reverse mortgage** is a type of loan available to homeowners aged 62 and older who have significant equity in their homes. Change ownership of title to Assets a. Preparing for Divorce: a. Successful Debt Management: Key 1 : Spend less than you earn and budget your money. \] Key 2: Know the costs Key 3: Understand the difference between good and bad debts. Key 4: Make sure you repay what you borrow- set your own standards. Key 5: Keep your credit score strong- it keeps costs down and is a source of emergency money Key 6: Don't live with bad debt and expensive debt. Avoid lenders who're telling the wrong stuffs and are encouraging you to get more and more debt.