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Katie Holt is a 72-year-old widow who has recently been diagnosed with Alzheimer's disease. She has limited financial assets of her own and has been living with her daughter Laurie for 2 years. Her only income is $700 a month in Social Security survivor's benefits. Laurie wants to make sure her mother will be taken care of if Laurie should die. Laurie, 40, is single and earns $60,000 a year as a human resources manager for a small manufacturing firm. She owns a condo with a current market value of $110,000 and has a $78,000 mortgage. Other debts include a $6,000 auto loan and $400 in various credit card balances. Her 401(k) plan has a current balance of $50,000, and she keeps $15,000 in a money market account for emergencies. After talking with her mother's doctor, Laurie believes that her mother will be able to continue living independently for another 3 years. She estimates that her mother would need about $1,200 a month to cover her living expenses and medical costs during this time. After that, Laurie's mother will probably need nursing home care. Laurie calls several local nursing homes and finds that it will cost about $5,500 a month when her mother enters a nursing home. Her mother's doctor says it is difficult to estimate her mother's life expectancy but indicates that with proper care some Alzheimer's patients can live 10 years after diagnosis. Laurie also estimates that her personal final expenses would be around $14,000, and she'd like to provide a $35,000 contingency fund that would be used to pay a trusted friend to supervise her mother's care if Laurie were no longer alive. Calculate Laurie's total life insurance requirements. In your analysis, assume an incidental special need amount of $14,000.
Consider the following information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is .97. Year Fund Market Risk-Free 2008 –17.00 % –33.5 % 2 % 2009 25.1 20.4 6 20..
Fernardo bank has interest expense of 150 million, earning assets of 1,400 million and a net interest margin of 5.00%. The bank also has interest bearing liabilities of 1,100 million. what is Fernando Bank spread?
Which one of the following will increase the cash cycle?
Kramerica Industries plans to introduce a new product to the market. Last week, Kramerica hired a marketing firm to develop a TV ad for the product. The marketing firm will develop the ad regardless of Kramerica's decision to continue the project or ..
John took a mortgage loan 5 years ago for $120,000 at 7% interest for 15 years, to be paid in monthly payments. Now, a lender is offering him a new mortgage loan at 5% for 10 years. What is the total financing cost (not include the loan amount itself..
Today is January 1, 2009 and you are considering purchasing an outstanding bond that was issued on January 1, 2007. It has a 9.5% annual coupon and originally had a 30-year maturity. (They mature on December 31, 2036.) The bonds can be called for 5 y..
You are engaged to be married in exactly one year. Your future in-laws have agreed to help pay for the cost of the wedding by matching the amount you have saved up at the time of the wedding. Currently, you have $5,000 to invest and can earn 8.4% com..
A premium bond that pays $60 in interest annually matures in seven years. The bond was originally issued three years ago at par. Which one of the following statements is accurate in respect to this bond today?
The market capitalization of NYC company is $10,000,000, the current share price is $40. NYC plans to raise new equity in an SEO, it plans to issue 100,000 new shares. Calculate the subscription ratio.
Thad Joslin was judged at fault in an automobile accident. Three others were awarded damages of $150,000, $75,000, and $75,000. Thad has 100/300 bodily injury liability coverage. What amount, if any, would not be covered by his insurance?
The heat loss through the exterior walls of a certain poultry processing plant is estimated to cost the owner $2,800 next year. A salesman from Superfiber Insulation, Inc., has told you, the plant engineer, that he can reduce the heat loss by 80% wit..
Assuming an equity premium of 4% and a risk-free rate of 3%, - what cost of capital would you recommend for 1 year of this firm's cash flows?
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