You own a house that costs $1 million. You buy a $20,000 insurance policy to compensate...

You own a house that costs $1 million. You buy a $20,000 insurance policy to compensate you for damage to the house. The dectible is $40,000. How much is the maximum that the insurance company may pay for the damage on your house.

less than 500,000

higher thatn 500,000 but less than 700,000.

higher thatn 700,000 but less than 900,000.

higher thatn 900,000 but less than 1,1000,000.

Higher than 1,100,000.

Solutions

Expert Solution

Solution-

Cost of the house =$10,00,000

Amount of insurance policy purchased =$20,000

Maximum amount that insurance company pay for damage = ($10,00,000/40000)*20000= $5,00,000

Hence answer is less than 5,00,000

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

You own a house that cost $200000 to build. You buy a $15000 insurance policy to...

You own a house that cost $200000 to build. You buy a $15000 insurance policy to compensate you for damage to the house. The deductible $25000.(If your house suffers $4000 damage from a storm, you pay for all repairs yourself. If the house suffers $45000, in damage, you pay$25000 and the insurance company pays the remaining $20000.) Graph the positions of the unhedged home, the home insurance and the hedged home position on the profit and loss diagram. In the...

Suppose that you decided to buy a new house. The house you want to buy costs...

Suppose that you decided to buy a new house. The house you want to buy costs $520,000 and the interest rate is 7%. You currently have $130,000 and are required to put a 20% down payment plus an additional 3% of the loan amount as closing costs. 1) When will you have enough money for the down payment and closing costs, assuming that the $80,000 is the only investment that you make? 2) Suppose that you plan to buy the...

4. You want to buy a house valued at $1.2 million. For a house this valuable,...

4. You want to buy a house valued at $1.2 million. For a house this valuable, the lenders demand a down payment of 25% and insist that the monthly payment on the 25 year mortgage loan is no more than 30% of your monthly gross income. The quoted rate on a 25 year fixed rate mortgage loan is 2.94% per year. Assume that you can make the down payment. (a): What is the least amount of your yearly gross income...

You are planning to buy a house today. The house costs $350,000. You have $50,000 in...

You are planning to buy a house today. The house costs $350,000. You have $50,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an EAR of 5% per year. What will be your annual mortgage payment?

Explain why hedging is like buying an insurance policy. To buy an insurance policy, you need...

Explain why hedging is like buying an insurance policy. To buy an insurance policy, you need to pay a premium; what is the corresponding premium in hedging? Give an example to clarify your answer.

You would like to buy a house that costs $ 350,000. You have $ 50,000 in...

You would like to buy a house that costs $ 350,000. You have $ 50,000 in cash that you can put down on the house, but you need to borrow the rest of the purchase price. The bank is offering you a 30-year mortgage that requires annual payments and has an interest rate of 7 % per year. You can afford to pay only $ 23,500 per year. The bank agrees to allow you to pay this amount each year,...

You would like to buy a house that costs $ 350,000. You have $ 50,000 in...

You would like to buy a house that costs $ 350,000. You have $ 50,000 in cash that you can put down on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 7 % per year. You can afford to pay only $ 22,970 per year. The bank agrees to allow you to pay this amount each year, yet...

You would like to buy a house that costs $ 350,000 . You have $ 50,000...

You would like to buy a house that costs $ 350,000 . You have $ 50,000 in cash that you can put down on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 7 % per year. You can afford to pay only $ 23,500 per year. The bank agrees to allow you to pay this amount each year,...

You would like to buy a house that costs $ 350,000. You have $ 50,000 in...

You would like to buy a house that costs $ 350,000. You have $ 50,000 in cash that you can put down on the house, but you need to borrow the rest of the purchase price. The bank is offering you a 30-year mortgage that requires annual payments and has an interest rate of 8 % per year. You can afford to pay only $ 25,580 per year. The bank agrees to allow you to pay this amount each year,...

Case Study for Financial Management. Case 1 You want to buy a house that costs $140,000....

Case Study for Financial Management. Case 1 You want to buy a house that costs $140,000. You have $14,000 for a down payment, but your credit is such that mort- gage companies will not lend you the required $126,000. However, the realtor persuades the seller to take a $126,000 mortgage (called a seller take-back mortgage) at a rate of 5%, provided the loan is paid off in full in 3 years. You expect to inherit $140,000 in 3 years, but...

Subjects