Consider a typical individual who owns the following financial instruments: A life insurance policy for $340,000;...

Consider a typical individual who owns the following financial instruments: A life insurance policy for $340,000; a certificate of deposit for $85,000; homeowner's and auto insurance policies; $14,000 in a mutual fund, and $230,000 in her pension fund at work. Which of these are instruments used primarily as stores of value and which are being used to transfer risk?

Expert Solution

A life insurance policy, and homeowner's and auto insurance policies are used to transfer risk as risk is transferred from insured to the insuring party.
A certificate of deposit, a mutual fund, and pension fund are a store of value as they these are deposits which can be used later.

Rahul Sunny answered 2 years ago

Which of the following is not an underwriting factor for an individual life insurance policy? Medical...

Which of the following is not an underwriting factor for an individual life insurance policy? Medical history of applicant Age and sex of the applicant Nationality of applicant Occupation and hobbies of applicant

Richard, age 35, owns an ordinary life insurance policy in the amount of $250,000. The policy...

Richard, age 35, owns an ordinary life insurance policy in the amount of $250,000. The policy is a participating policy that pays dividends. Richard has a number of financial goals and objectives. For each of the following situations, identify a dividend option that could be used to meet Richard's goals. Treat each situation separately. a. Richard finds the premium payments are financially burdensome. He wants to reduce his annual premium outlay. b. Richard has leukemia and is uninsurable. He needs...

ABC Corporation purchased a $2million life insurance policy on their Chief Financial Officer (CFO), who was...

ABC Corporation purchased a $2million life insurance policy on their Chief Financial Officer (CFO), who was a 20 percent stockholder in the corporation. Two years later the CFO resigned and sold his stock in the corporation. Three months later, the former CFO dies and ABC Corporation files a claim with the insurer for $2 million. Can ABC Corporation collect on the policy?

Walter owns a whole-life insurance policy worth $52,000 that directs the insurance company to pay the...

Walter owns a whole-life insurance policy worth $52,000 that directs the insurance company to pay the beneficiary $260,000 on Walter’s death. Walter pays the annual premiums and has the power to designate the beneficiary of the policy (it is currently his son, James). What value of the policy, if any, will be included in Walter’s gross estate upon his death?

Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the...

Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the beneficiary $500,000 on her death. Ashley pays the annual policy premiums and has the power to designate the beneficiary of the policy. What value of the policy, if any, would be included in Ashley's estate upon her death?

Edible Chemicals Corporation owns a $2 million whole life insurance policy on the life of its...

Edible Chemicals Corporation owns a $2 million whole life insurance policy on the life of its CEO, naming Edible Chemicals as beneficiary. The annual premiums are $72,000 and are payable at the beginning of each year. The cash surrender value of the policy was $22,000 at the beginning of 2018. 1. & 2. Prepare the appropriate 2018 journal entries to record insurance expense and the increase in the investment assuming the cash surrender value of the policy increased according to...

An insurance company sells a $17,500, three-year term life insurance policy to an individual for $675....

An insurance company sells a $17,500, three-year term life insurance policy to an individual for $675. Find the expected return for the company if the probability the individual will live for the next three years is 0.99. (Round your answer to the nearest cent.)

An insurance company sells a $16,000, eight-year term life insurance policy to an individual for $1,620....

An insurance company sells a $16,000, eight-year term life insurance policy to an individual for $1,620. Find the expected return for the company if the probability the individual will live for the next eight years is 0.93. (Round your answer to the nearest cent.)

Matthew owns an insurance policy (face amount of $2,165,500) on the life of Emily with Uma...

Matthew owns an insurance policy (face amount of $2,165,500) on the life of Emily with Uma listed as the designated beneficiary. If Emily dies first and the $2,165,500 is paid to Uma, how much is included in the following gross estates? If an amount is zero, enter "0". a. Matthew's gross estate? b. Emily's gross estate?

Richard age 35 owns an ordinary life insurance policy in the amount of $250,000.

Richard age 35 owns an ordinary life insurance policy in the amount of $250,000. The policy is a participating policy that pays dividends. Richard has a number of financial goals and objectives. For each of the following situations, identify a dividend option that could be used to meet Richard's goal. Treat each situation separately.*Richard finds the premium payments are financially burdensome. He wants to reduce his annual premium outlay.*Richard has leukemia and is uninsurable. He needs additional life insurance protection.*Richard...

Question