Paige, age 26, has purchased a new Ford sedan. She has a clean driving record. Collision coverage on the car in a small Midwestern city where she lives would cost approximately $630 every six months with a $100 deductible, $566 with a $250 deductible, $492 with a $500 deductible, and $368 with a $1000 deductible. The state has a compulsory insurance law that requires minimum liability limits of #25,000/$50,000/$25,000. Paige would like to purchase collision insurance with a $100 deductible because the out-of-pocket cost to repair her car in an accident where she is a fault would be relatively small. she also would like to purchase only minimum liability limits, because she has few financial assets to protect. Paige is also concerned that she might be seriously injured by a driver who has no insurance.

a.Paige wants to know why auto insurance costs too much. Explain to her the factors that determine auto insurance rates.

b.Do you recommend that Paige purchase collision insurance with a $100 deductible? Explain your answer.

c.Do you agree with Paige that only minimum liability limits should be purchased because she has few financial assets to protect? Explain your answer.

d.Assume that Paige ads the uninsured motorists coverage to her policy. Would she be completely protected against the financial consequences of a bodily injury caused by an uninsured driver? Explain your answer.

e.Paige would like to reduce her auto premiums because her monthly car payments are high. Explain to Paige the various methods for reducing or holding down auto insurance premiums.