Class%20#5%20461%20NDFI%20Ins%20MF

Class%20#5%20461%20NDFI%20Ins%20MF - Non Deposit Financial...

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Non Deposit Financial Intermediaries Insurance companies Mutual (and other) funds
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2 Current Events Presentations TODAY: Dooyoung Kim and Daniel Wang THURSDAY: Kati Ko and Ksenija Starovoita Assignment: Text, Chapters 4 and 6 Bank or BHC selection due by 2:00 p.m. Thursday Seating Chart Today
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3 Class Outline 1. Life insurance companies 2. Property & casualty insurance companies 3. Mutual (and other) funds Types of funds and their differences Investment objectives, loads, expenses
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Number for the day 9.6% is the August 2010 unemployment rate. The August 2010 unemployment rate moved back up a bit from July’s 9.5% figure. 4
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5 1. Life insurance companies The two extremes of life insurance contracts are: Term insurance— coverage only. Pay premium at beginning of the policy and coverage lasts for a stated term . Simply buying protection. If you don’t die, no payout to you or beneficiary. Premiums rise as age at time of purchase increases. Cheaper than whole life.
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6 Life insurance policy types Whole life insurance— incorporates a savings element (with a guaranteed return) along with coverage. Not limited to a term—lasts for the whole life . Usually a level premium payment for life. Overpayments (for insurance) in early years are invested and build a cash value . Policy owner can access the cash value prior to death. Beneficiary receives payment upon death of insured.
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7 Life insurance flows/assets Inflows come from insurance premiums paid (in advance) and asset earnings . Premium income is invested, sometimes for a long time, until payout is made. Outflows are to pay claims and are highly predictable in large groups. Assets are: Long term—long investment horizon Little need for liquidity (predictable flows) No taxes paid, so no tax exempt securities Not much concern for inflation; is a marketing tool NOTE: Policy loans—lending the cash value in the policy
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Class%20#5%20461%20NDFI%20Ins%20MF - Non Deposit Financial...

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