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Use the following information to answer questions 1-3:

Layla has owned her home for 12 years and expects to live in it for 5 more years. She originally borrowed $200,000 at 5% for 30 years to buy the home. She still owes $130,000 on the loan. Interest rates have fallen to 4%, and Layla is reconsidering refinancing the loan for 15 years. She would have to pay 3 points on the new loan with no repayment on the current loan.

Question 1
What is Layla's current monthly payment?

Question 2
Calculate the monthly payment on the new loan

Question 3
Run the numbers worksheet, "When You Should Refinance Your mortgage" on page 278. Show the numbers at each line. Use 3% for the investment return. Advise Layla on whether she should refinance.

Question 4
Jim's house was damaged when lightening struck his roof. The cost to fix the home will be $30,000. He carries an HO-3 policy with a $500 deductible. If the home is insured for $200,000 and the replacement value is $180,000, how much will Jim's reimbursement from the insurance company be?

Question 5
Victor has a $100,000 participating cash-value policy written on his life. The policy accumulated $6,700 in cash value. Victor borrowed $4,700 of this value. The policy also accumulated unpaid dividends of $2,000. Yesterday Victor paid his premium of $1,000 for the coming year. What is his death benefit from this policy if he dies today?

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Use the following information to answer questions 6 and 7:

Jen caused a 3 car accident near her home in Akron, Ohio. She has the Ohio minimum liability coverage with no collision or comprehensive coverage. Jason, the driver of one of the other cars, suffered injuries leading to $42,000 in medical bills. No other injuries were suffered. The damage to Jen's car was $2,000 and she caused $22,000 in damage to the other two cars.

Question 6
How much of the amount of the bodily injury and property damage will be covered by the insurance policy?

Question 7
How much of the amount of the bodily injury and property damage will be paid for by Jen?

Question 8
Anna and Mike are considering their life insurance options. They both make about $50,000/year. In the evet that something happens to one of them, they figure they will need to cover the other person's salary at 80% for 10 years. Anna and Mike do NOT participate in social security. They are doing a needs-based approach and want to include $5,000 in final costs to cover the funeral arrangements and $10,000 for readjustment period needs. Based on the needs-based approach, what face value of life insurance is needed? [Assume that Anna and Mike have no other resources to put toward this need and that they would invest the life insurance proceeds in an account returning 4% annually.]

Question 9
Dr. Houselover has an annual income of $129,000. She has monthly payments for auto loan ($300), student loan ($250) and credit card payments ($400). Using a 36 precent back-end ratio, what are the monthly mortgage payments (including taxes and insurance) she can afford?

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Chris had $80,000 in investments at the beginning of the year that consisted of a diversified portfolio of stocks (30%); bonds (50%) and cash equivalents (20%). His returns over the past 12 months were 6% in stocks, 3% on bonds and 1% on cash equivalents.

Question 10
What is Chris's average return for the year?

Question 11
Calculate the amount of stocks, bonds, and cash equivalents in his portfolio today.

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Use this information for questions 12 and 13:

Rebecca calculated that she needs a total of $1,400,000 at retirement (beyond pensions and Social Security). Rebecca is 34 years old, investing aggressively and expecting to earn 7% in her retirement account. She plans to retire at age 62.

Question 12
How much doe Rebecca need to save annually to achieve her goal?

Question 13
Once in retirement, Rebecca would like annual retirement income of $70,000. She would like the savings to last for 25 years during retirement. Assuming that she could earn a 4% after-tax and after-inflation rate of return on their investments, did she save enough?

Question 14
My husband and I estimate that we will need $50,000 in 18 years for the education of our new born daughter. Assuming we can obtain a return of 4%, how much should we invest annually?

Question 15
Marry wants to help pay for her grandchild's education. How many years will it take her to reach her goal of 30,000 if she invests 1,000 per year, earning 6%?

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Use for questions 16-18:

Bob is a 37 year old and is an account manager with a large telecom company. He's ben dragging his feet with his retirement plan, opting instead for expnsive trips to Vegas and Aspen. He's decided it's time to get serious about saving for his retirement. He plans to retire at age 67 and travel the world. Because of his plan, he figures he needs about $70,000/year in retirement. His grandfather lived until he was 86 and his dad is in perfect health at age 70, therefore Bob figures he should plan to be around until he is 90. So far, he has $11,000 saved for retirement and because of his aggressive investment philosophy, is planning for a return on all his investments before retirement of 8%. Following retirement, he will invest more conservatively and will plan for a 5% return on investments. His company's retirement plan is defined contribution, so he doesn't plan on getting a pension. He is not counting on Social Security to be around, so he isn't including that in his plan. Thus, his entire retirement will be funded on his own savings.

Question 16
How much will Bob have at the end of his work life, if he doesn't add to his current savings?

Question 17
How much money will Bob need during retirement based on his calculations?

Question 18
How much will Bob need to save each year to be ready for retirement at age 67?

Question 19
Based on text estimated, what is the fair price for a $1,000,000 term life insurance policy for a 45-year-old female who smokes?

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Use for questions 20-22:

Bob recently had surgery. His total bill for this event, which was his only health care expense for the year, came to $9,890. His health insurance plan has a $500 deductible and an 80/20 coinsurance provision. The cap on Bob's coinsurance share is 2,000.

Question 20
How much of the bill will Bob pay?

Question 21
How much of the bill will be paid by Bob's insurance?

Question 22
Now assume the bill was actually $13,890 (not $9,980). How much will Bob pay?

Question 23
Jim is 52 years old. He is in the 28% marginal tax bracket and earned 6.25% this year on the funds in his IRA. Ignoring any taxes paid on the original investment, what is Jim's after tax return in his IRA this year?