Solution: a. $8.17 40 = $326.80 b. $6.00 76 = $456.00 c. $7.75 65 = $ 503.75 Longer mortgage terms mean a lower monthly payment. As rates increase, a higher monthly payment is required. 7. Kelly and Tim Browne plan to refinance their mortgage to obtain a lower interest rate. They will reduce their mortgage payments by $83 a month. Their closing costs for refinancing will be $1,670. How long will it take them to recover the cost of refinancing? Solution: $1,670 / $83 = 20.12 (about 21 months)
Chapter 10 1. Most home insurance policies cover jewelry for $1,000 and silverware for $2,500 unless items are covered with additional insurance. If $3,800 worth of jewelry and $2,800 worth of silverware were stolen from a family, what amount of the claim would not be covered by insurance? Solution: ($3,800 - $1,000) + ($2,800 - $2,500) = $3,100 2. What amount would a person with actual cash value (ACV) coverage receive for two-year-old furniture destroyed by a fire? The furniture would cost $1,000 to replace today and had an estimated life of five years. 2] = $600 4. If Carissa Dalton has a $130,000 home insured for $100,000, based on the 80 percent coinsurance provision, how much would the insurance company pay on a $5,000 claim? 6. When Carolina ’s house burned down, she lost household items worth a total of $50,000. Her house was insured for $160,000 and her homeowner’s policy provided coverage for personal belongings up to 55 percent of the insured value of the house. Calculate how much insurance coverage Carolina’s policy provides for her personal possessions and whether she will receive payment for all of the items destroyed in the fire. Solution: Multiply the insured value of the house ($160,000) by the percentage of the coverage (55 percent) $160,000 x .55 = $88,000. Because the value of the lost items was $50,000, Carolina will receive payment for all of the items destroyed by fire.
- Three '12
- Payment, affordable home purchase