QUESTIONS

Please answer the following questions clearly showing the calculations wherever they are required.Do not just give the final number as the answer, where calculations are required.Show the workings.If you do not show the workings you will not receive full credit.

1.List the Buckinghams' financial strengths and weaknesses. (10 points)

2.After reading the case what additional information would you request from the Buckinghams to complete your data-gathering phase? (5 points)

3.Assume that Nigel is in a serious automobile accident during 2016 and is unable to perform the duties of his occupation for 208 consecutive days.What benefits will be receive under his long-term disability insurance policy?Assume 260 working days in a year.(5 points)

4.Assume that in 2017, Nigel is driving his car on a foggy night and the car collides with a deer in the road.As a result, Nigel incurs medical expenses of $1,000, and his friend, Bill, who is riding with him, incurs medical expenses of $2,000.The front bumper of the car also sustains damage of $1,500.If Nigel files a claim for these items under his personal auto policy (PAP), what amount will the policy pay? (5 points)

5.Calculate the following financial ratios for the Buckinghams (10 points)

a.Liquid Assets / Debt Payments

b.Net Worth / Total Assets

c.Total Debt / Total Assets

d.Annual Housing and Debt Payments / Annual Gross Income

e.Annual Savings / Annual Gross Income

6.Calculate the original purchase price of the furniture that Nigel and Elizabeth own (Hint: Use time value of money calculations). (5 points)

7.Assuming that the Buckinghams are planning to buy their dream house seven years from now and expect house prices to increase at the same rate as the general economic inflation rate, how much will they have to save at the end of each month to make the down payment if they plan to earn the assumed after-tax investment rate of return?(Hint: Compute the future value of the house price at inflation rate to get how much they will have to put down as down payment) (10 points)

8.Nigel is trying to determine which is the better choice:the traditional IRA or the Roth IRA.Which do you recommend and why? (5 points)

9.In 2015, Elizabeth sustains injuries while playing with Wilfred and Robert.Medical expenses totaled $1,800 of which $1,600 were covered.The insurance company paid medical expenses in what amount?(Assume that the Buckinghams had no other 2015 medical claims prior to this claim.) (5 points)

10.If there was a fire in the Buckinghams' apartment building and their in-wall speaker system was destroyed, would they be covered under the HO-4 policy, and if so, to what extent? (5 points)

11.What does guaranteed renewable mean with regard to Nigel's disability policy? (5 points)

12.What is the approximate 2016 federal adjusted gross income (AGI) for the Buckinghams?(10 points)