YUPFP #7-October 25,2007

# YUPFP #7-October 25,2007 - LECTURE#7-PERSONAL FINANCIAL...

This preview shows pages 1–9. Sign up to view the full content.

1 LECTURE #7-PERSONAL FINANCIAL PLANNING AGENDA 1. Take up the Mid-Term Exam. 2. Chapter #10-Take up Problems #6, #8 & 9. 3. Chapter #14-Take up the Chapter Notes, multiple choice questions and problems.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2 Chapter #10 Problem #6 Assuming Laura Lobo is a non-smoker with average health: The rate for a \$250,000 coverage term policy at age 32 will fall within age group 30 (i.e.30-34). From Table 10.2: 10-year term: \$132.50 20-year term: \$217.50 Therefore the premium coverages are: 10-year term: 340 x 250,000/132.50=641,509 20-year term: 340 x 250,000/217.50=390,805. She should consider if she needs life insurance beyond the 10 or 20 year term. The premium on term life will rise with age beyond the fixed term, while it is constant with a whole life policy.
3 Chapter #10 Problems-Continued Problem #8 -See last week’s lecture notes plus class take-up.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
4 Chapter #10 Problems-Continued Problem #9 Calculate the present value of the first 10 years of earnings: 35,000 { [1-(1.05 ) 10 ] = \$316,518 (.06-.05) 1.06 Then calculate the present value of the next 10 years of earnings: 35,000(1.05) 10 { 1-{1.04} 10 } 1 =276,070 (.06-.04) 1.06 (1.06) 10
5 Chapter #10 Problems-Continued Problem #9-Continued Lastly, calculate the P.V. of the last 15 years of earnings: \$35,000 (1.05) 10 (1.04) 10 { 1- 1.03 } 15 } 1 (.06 - .03) 1.06 1.06 20 =\$306,915 Therefore, the amount of insurance that he should buy, using a 75% adjustment: = (.75) [316,518 + 276,070 + 306,915] = 674,627.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
6 Chapter #14-Study Notes Basic Terms 1. Investments and Savings Savings-Simply the money that is left over after your consumption. Investing-Using the savings that you have and investing it in securities to earn investment income.
7 Investment Terms Defined-Continued Basic Characteristics of an Investment See page 331. The most important characteristics that affect an investors investment decision are return and risk. Return on Investment-Total return includes income return and capital gains return. Rate of Return = P 1 - P 0 + D P 0 (See page 332 and Example 14.1). Expected Rate of Return = E(P 1 ) – P 0 + E(D) P 0 Review Example 14.2.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
8 Investment Risks RISK is the uncertainty about the rate of return that you will earn from an investment.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern