1. Sally has monthly income of $5,600. Her living expenses per month amount to $1,200 for food, utilities, entertainment, etc. She pays $250 for insurance (property, health and life combined) every month. Her monthly mortgage payment is $1,000. She has credit card balances of $750. She already saved enough in emergency fund. How much money can Sally set aside for investment per month?

2. Assume you have $50,000 to invest in Morgan Stanley Company. Its price is $100 per share. It pays annual dividend of $2 per share. Assume you sell your shares at the end of the year for $110 each. What is your rate of return?

3. Assume ABC Company bond of $1,000 par value, 8% annual coupon and 10 years maturity trades at $1,000. Assume Isaak buys this bond and holds it for four years and sells it when interest rate in the economy for similar bonds is 10%.

a) at what approximate price would Isaak sell the bond?

b) calculate Isaaks holding period rate of return over four years.

c) calculate Isaaks average annual rate of return.

4. Describe the advantages and disadvantages of investing through mutual funds.

5. Assume Alba is looking to purchase a refrigerator. She considers performance, energy efficiency, durability and brand as important attributes with weights of 0.4, 0.3, 0.2 and 0.1 respectively. Then she gathers ratings for three refrigerators with respect to these attributes as follows.

	GE	Bosch	LG
Performance	7	8	8
Energy efficiency	6	7	8
Durability	8	8	6
Brand	9	7	8
Cost	$2,300	$2,500	$2,300

Which refrigerator would Alba choose and why?

6. Car decision. Assume you need a car and you are evaluating lease vs. buy options. The buying option is with auto loan at interest rate of 3%. The dealer offers you the following.

Lease option: $2,000 security deposit, $500 monthly payment for 48 months. Expected end of lease charges are $600.

Purchase option: $4,000 down payment, $600 monthly payment for 48 months. At the end the car is estimated to have resale value of $8,000.

Do the proper analyses and decide which option is better.

7. What house value can Betty afford? Bettys annual income is $90,000 and she has monthly credit payments of $500. She is looking for a house financed by 30 year 6% mortgage with 20% down payment. Property tax and insurance on the home is expected to be $300 per month. Calculate the value of the house she can afford.

8. Assume Jack has an auto insurance policy of 25/75/50. He was involved in an accident in which he was found at fault. The court awarded damages to three people for bodily injuries amounting to $15,000, $30,000 and $26,000. He also caused damage to the other drivers car amounting to $28,500 and damage to store front of $32,500. Based on his policy, calculate how much the insurance pays and how much Jack pays out of pocket.

1. 9. Oliver and his family have home insurance policy that covers the home for $300,000 and personal property up to 40% of the value of the house. The policy also covers additional living expenses while the home is under repair. Recently, a wind broke a tree branch that fell on the side of the house breaking part of the roof and corner wall. A refrigerator inside the house was also damaged. The cost to repair the house is estimated at $35,000 and the family need to stay at a motel for one week incurring $12,500. The refrigerator was purchased 5 years ago for $6,000. Its current replacement price is $7,500. It has estimated life of 10 years.
   1. How much would the family receive from the insurance policy for the home and the additional living expenses?
   2. How much would the family receive for the damaged refrigerator under (i) the actual cash value method, (ii) under the replacement cost method?
2. 10. Jen and Jon have two children aged 2 and 4. Jon is working earning $75,000 per year. Jen is taking care of the kids. How much life insurance should Jon buy under the following assumptions?
   1. Multiple of income method
   2. Easy method
   3. Non-working spouse method