FI 341 Study Guide - Midterm Guide: Universal Life Insurance, Whole Life Insurance, Variable Universal Life Insurance

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lilacwolf591

28 Feb 2016

School

University of Alabama

Department

FIN

Course

FI 341

Professor

William Rabel

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Document Summary

Fi 341 principles of risk management & insurance. * it is important for you to know all the key concepts and terms for every chapter. 1. a. b. c. , 3, 4. b. , 5. (explain for roth iras only) a. b. c. d. Blackout period- the period from the time that social security survivor benefits terminate to the time. Capital retention approach- preserves the capital needed to provide income to the family. Cash surrender value- the amount paid to a policy holder who surrenders the policy. Cash value life insurance- the amount paid to a policyholder who surrenders the policy. Convertible- the term policy can be exchanged for a cash value policy without evidence of insurability. Current assumption whole life insurance- (also called interest sensitive whole life) a nonparticipating whole life policy in which the cash values are based on the insurer"s current mortality, investment, and expense experience. Dependency period- follows the readjustment period; it is the period until the youngest child reaches age 18.

Related Questions

1. Returns and Cost of Equity. Using the stock price data in the attached spreadsheet, estimate the cost of equity for Bank of America. Assume a market risk premium of 5% and a risk free rate of 3.29

Date	Return	Market Return
20070228	-2%	-1.40%
20070330	0%	1.29%
20070430	0%	3.98%
20070531	1%	3.89%
20070629	-4%	-1.48%
20070731	-3%	-3.18%
20070831	7%	1.17%
20070928	0%	4.09%
20071031	-4%	2.58%
20071130	-4%	-4.92%
20071231	-9%	-0.44%
20080131	7%	-6.22%
20080229	-10%	-2.17%
20080331	-3%	-1.04%
20080430	-1%	5.11%
20080530	-9%	2.38%
20080630	-28%	-7.84%
20080731	38%	-1.33%
20080829	-5%	1.06%
20080930	14%	-9.80%
20081031	-31%	-18.46%
20081128	-33%	-8.46%
20081231	-11%	2.21%
20090130	-53%	-7.73%
20090227	-40%	-10.02%
20090331	73%	8.67%
20090430	31%	10.94%
20090529	26%	6.78%
20090630	17%	-0.31%
20090731	12%	8.17%
20090831	19%	3.15%
20090930	-4%	4.52%
20091030	-14%	-2.80%
20091130	9%	5.71%
20091231	-5%	2.84%
20100129	1%	-3.71%
20100226	10%	3.48%
20100331	7%	6.36%
20100430	0%	2.00%
20100528	-12%	-7.91%
20100630	-9%	-5.07%
20100730	-2%	7.03%
20100831	-11%	-4.28%
20100930	5%	9.15%
20101029	-13%	3.85%
20101130	-4%	0.51%
20101231	22%	6.72%
20110131	3%	1.92%
20110228	4%	3.82%
20110331	-7%	0.34%
20110429	-8%	2.87%
20110531	-4%	-1.49%
20110630	-7%	-1.84%
20110729	-11%	-2.25%
20110831	-16%	-5.75%
20110930	-25%	-8.49%
20111031	12%	11.40%
20111130	-20%	-0.62%
20111230	2%	0.37%
20120131	28%	5.41%
20120229	12%	4.12%
20120330	20%	2.40%
20120430	-15%	-0.68%
20120531	-9%	-6.55%
20120629	11%	3.82%
20120731	-10%	1.03%
20120831	9%	2.63%
20120928	11%	2.65%
20121031	6%	-1.41%
20121130	6%	0.62%
20121231	18%	1.25%
20130131	-2%	5.41%
20130228	-1%	0.83%
20130328	8%	3.53%
20130430	1%	1.49%
20130531	11%	1.91%
20130628	-6%	-1.50%
20130731	14%	5.27%
20130830	-3%	-2.57%
20130930	-2%	3.75%
20131031	1%	3.99%
20131129	13%	2.49%
20131231	-2%	2.61%

lilackangaroo550

Please help with the below problem. I don't understand how to solve. Please show work and steps so I will understand.

Apply cluster analysis to the numerical data in the excel file credit approval decisions. Analyze the clusters and determine if cluster analysis would be a useful classification method for approving or rejecting loan application.

Modified Credit Approval Decisions

Homeowner Credit Score Years of Credit History Revolving Balance Revolving Utilization Decision

1 725 20 $11,320 25% 1

1 573 9 $7,200 70% 0

1 677 11 $20,000 55% 1

0 625 15 $12,800 65% 0

0 527 12 $5,700 75% 0

1 795 22 $9,000 12% 1

0 733 7 $35,200 20% 1

0 620 5 $22,800 62% 0

1 591 17 $16,500 50% 0

1 660 24 $9,200 35% 1

1 700 19 $22,000 18% 1

1 500 16 $12,500 83% 0

1 565 6 $7,700 70% 0

0 620 3 $37,400 87% 0

1 774 13 $6,100 7% 1

1 802 10 $10,500 5% 1

0 640 7 $17,300 59% 0

0 523 14 $27,000 79% 0

1 811 20 $13,400 3% 1

0 763 2 $11,200 70% 0

0 555 4 $2,500 100% 0

0 617 9 $8,400 34% 0

1 642 13 $16,000 25% 1

0 688 3 $3,300 11% 1

1 649 12 $7,500 5% 1

1 695 15 $20,300 22% 1

1 701 9 $11,700 15% 1

0 635 7 $29,100 85% 0

0 507 2 $2,000 100% 0

1 677 12 $7,600 9% 1

0 485 5 $1,000 80% 0

0 582 3 $8,500 65% 0

1 699 17 $12,800 27% 1

1 703 22 $10,000 20% 1

0 585 18 $31,000 78% 0

1 620 8 $16,200 55% 0

1 695 16 $9,700 11% 1

1 774 13 $6,100 7% 1

1 802 10 $10,500 5% 1

0 640 7 $17,300 59% 0

0 536 14 $27,000 79% 0

1 801 20 $13,400 3% 1

0 760 2 $11,200 70% 0

0 567 4 $2,200 95% 0

0 600 10 $12,050 81% 0

1 702 11 $11,700 15% 1

1 636 8 $29,100 85% 0

0 509 3 $2,000 100% 0

0 595 18 $29,000 78% 0

1 733 15 $13,000 24% 1

New Data to Classify

Homeowner Credit Score Years of Credit History Revolving Balance Revolving Utilization Decision

1 700 8 $21,000 15%

0 520 1 $4,000 90%

1 650 10 $8,500.00 25%

0 602 7 $16,300.00 70%

0 549 2 $2,500.00 90%

1 742 15 $16,700.00 18%

Solve

Write your answers on the line. Answer the questions, and then put the document in the drop box. Refer to the study aid given for this chapter in the chapter notes. You may use either the interest factor table at the back of your textbook or a calculator that has financial functions. 1. What is the future value of the following investments? a.$4,000 invested for 11 years at 9% compounded annually _______7960________ b.$8,000 invested for 10 years at 8% compounded annually __________14000_____ 2. How many years will the following take? Work backward to find the interest factor and then looking at the interest rate for the problem in the correct interest factor table in the back of the text, look locate your interest factor and the corresponding year is your answer. a.$550 to grow to $1,043.90 if invested at 6% compounded annually____________ b.$40 to grow to $88.44 if invested at 12% compounded annually ______________ 3. At what annual rate would the following have to be invested? Work backward to find the interest factor and then looking at the number of years for the problem in the correct interest factor table in the back of the text, look locate your interest factor and the corresponding interest rate is your answer. a.$550 to grow to $1,898.60 in 13 years _______________ b.$275 to grow to $406.18 in 8 years _______________ 4.What is the present value of the following future amounts? a.$800 to be received 10 years from now discounted back to present at 10% _______________ b.$400 to be received 6 years from now discounted back to present at 6% _______________ 5.What is the future value of each of the following streams of payments? a.$500 a year for 10 years compounded annually at 6% _________________ b.$150 a year for 5 years compounded annually at 14% _________________ 6. What is the present value of the following annuities? a.$3,000 a year for 10 years discounted back to the present at 8% ________________ b.$50 a year for 3 years discounted back to the present at 3% _________________ 7.Trish Nealon, who recently sold her Porsche, placed $20,000 in a savings account paying annual compound interest of 7%. Calculate the amount of money that will have accrued if she leaves the money in the bank for 1, 5, and 15 years. a. 1 year ___________________ b. 5 years ___________________ c. 15 years ___________________ 8. Sales of a new marketing book were 10,000 copies this year and were expected to increase by 16% per year. What are expected sales in year three? ___________________ 9. You lend a friend $15,000, for which your friend will repay you $37,313 at the end of 5 years. What interest rate are you charging your âfriendâ? ___________________

FI 341 Study Guide - Midterm Guide: Universal Life Insurance, Whole Life Insurance, Variable Universal Life Insurance

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