exam 3

what is unit pricing?

Uses a standard measurement to compare prices of packages of different sizes

how do you calculate unit price?

total price divided by number of units

example: price divided by amount of cups times the amount of cups you want

Full Warrenty

states a defective product can be replaced within a certain amount of time, usually shorter period of time for item to be replaced

Limited Warrenty

 covers only certain aspects of a product, such as parts,  or requires the buyer to incur part of the cost for shipping or repairs.

Implied Warrenty

 covers intended use of the product or other basic understandings not included in writing , if product does not do what intended to you can return it(ex toaster must be able to toast bread)

Certified Pre Owned cars

Are nearly new cars that come with the original manufacturer’s guarantee of quality

Rigorous inspection and repair process means the vehicles are sold at higher prices than used vehicles without the certification

paying premium for safety and quality

What’s the largest expense that does not show up in your mothly budget

depreciation (loss of a vehicles market value due to time)

what does it mean to lease a car

a contractual agreement with monthly payments for the use of a car over a certain period of time

who owns a leased car

dealership/car company

what is capitalized cost

what the car is valued at, at the time of the lease

Residual Value

What you can buy the car for at the end of the lease

What is the Sticker Price?

Also known as Manufacturers Suggested Retail Price.

 a sticker printed on the vehicle with the suggested retail price. This label presents the base price of the car with added features.

levels playing field, more popuar models sell close to msrp

How to find depreciation

capitilized cost - residual value

invoice price

: also known as dealers price, is an amount less than the sticker price. Difference between invoice price and sticker price is the range of negotiation. 

typically below msrp, if above msrp- run!

Where do you see the sticker price and invoice price

on the vehicle , edmonds new car manual prices, consumer reports, on dealership website

What are car buying services? how do they work?

What are they: Businesses that help a car buyer purchase a new car at a reasonable price

How work:  also referred to as auto brokers, they offer desired options for prices ranging from $50 to $200 over the dealers cost. 1st auto broker charges small fee for price information on desired models. Then if buyer decides to purchase the car, auto broker arranges the purchase with a dealer near you

What is arbitration

The settlement of a difference between a third party- the arbitrator- whos decision is legally binding. After both parties agree to arbitration, each party presents its case.

What claims are handled in small claims court

Typically from 1,000 to 10,000. advantages of small claims court. you do not need a lawyer, court cost are low, most cases are resolved quickly

Leasing a car typically results in a lower monthly payment when compared to financing or buying the same car. true or false?

true

You need a lawyer when you appear in small claims court. true or false

false

The expected car value at the end of the lease is the…

Residual Value

What is the Lemon Law

3 or more unsuccsessful repair attempts for the same defect or more 30 days of service, within first 12 months or 12,000 miles of car ownership

results in the car owner being able to seek a refund or exchange for a fully working same model

What is a class action law suit?

A legal action taken by a few individuals on behalf of all the people who have suffered the same alleged injustice

What is insurance

protection against potential loss (different types of insurance)

Risk

uncertainty or lack of predictability such as a loss that a person or property faces

Risk Assumption

Taking responsibility for risk (not buying insurance)

Risk Shifting

Shifting the risk to another party ( purchase insurance to transfer risk to insurance company in exchange for premiums (payments) you give them)

Peril

cause of possible loss such as fire, windstorms, robbery, disease, or death (not in your control like risk)

Hazard

Is something that increases the liklihood of loss, such as driving drunk, smoking in bed, or defective house wing

what is deductible

set amount that the policy holder must pay per loss on an insurance policy

more accidents = higher premuims

You must pay deductible then anything above that insurance pays

As deductibe goes up, premium goes down always go in opposite directions

when renew insurance and if you get a lot of car accidents, premium wil go up

Liability

legal responsibility for someone elses loss or injury

someone slips on ice at your home

renters insurance typically only covers which value of what you have lost

actual value

What does renters insurance typically cover

Usually JUST personal property WHILE you are at the house/apartment.

WON'T cover your property if you are travelling... like luggage.

NOT covered under landlord's insurance coverage, unless it's the landlords fault (faulty wiring or out of code)

If you have an accident and it costs 500 to repair your car and the deductible is 200 how much would you pay out of pocket

200

When you insure your home what is covered by atypical policy

• Building and other structures

• Additional living expenses

• Personal property

• Personal liability

• Specialized coverage

• Floods, sewage backup, earthquakes

• Typically this costs EXTRA!

How much personal property is generally covered under a homeowners policy?

• Typically 55%, 70% or 75%... Of the insured value.

• Example: If home is insured for $100k, then either $50k, $70k or $75k of PERSONAL property is covered.

• Typically only covered $5k worth of jewelry! (jewlery will be asked)

What is a personal policy floater?

Additional insurance to cover a high price object

• Example is high priced artwork

• Will need to get proof of value via a professional appraisal

• if have expensive piece of artwork what insurance should get? (personal

• on a object wheras umbrella is lifechanging situation

What is an umbrella policy?

doesnt happens that often situations

Supplement to your standard liability coverage laditional

coverage to normal insurance to cover really big and bad things happening)

Typically sold in $1 million blocks of coverage

life changing episode

do homeowners policys cover damaged by rain

yes

Do standard homeowners insurance policies cover: Damage caused by flooding?

no

Do standard homeowners insurance policies cover: Damage to home caused by trees?

Yes

Do typical homeowners insurance policies cover: Damage caused by sewage backup?

no

Do you insure the land your house sits on?

No

• You do not insure the land that the house sits on

• Your liability and umbrella policies/coverage will cover your land

What your policy actually covers:

Dwelling coverage → the structure itself + other structuresPersonal property → your belongings Liability protection → if someone gets hurtAdditional living expenses → if you can’t stay in your home

ACTUAL CASH VALUE:

What your "thing" is worth today... which factors in DEPRECIATION (not as good coverage as replacement)

REPLACEMENT VALUE:

Full value... depreciation isn't taken into account

Replacement coverage is more $$ than actual cash value coverage

DEPRECIATION:

Loss of value of an item as it gets older

What factors affect auto insurance rates?

• Vehicle Type (year, make,model... color?!)

• Where live (rating territory)... rural vs. urban

• More accidents and theft in cities

• Drive type:

• Age (younger and elderly drivers pay more for insurance)

• Sex (females are more responsible)

• Martial status (again, more responsible)

• Driving record

What is an assigned risk pool?

A state-run program that provides car insurance to those drivers with poor diving or accident records

• Rates are much higher until person can obtain conventional coverage

• Each insurance company in that state must take a portion of these risky policyholders

#15: According to the text, how much does one moving violation increase your auto insurance?

Two? Three?

• 1 moving violation: +18%

• 2 moving violations: +34%

• 3 moving violations: +54%

Your house should be insured for:

The replacement value

100/300/50 motor liability coverage

100: (bodily injury) $100,000 limit that will be paid to one person in an accident

300: (bodily injury) $300,000 limit that will be paid to all

persons in an accident

50: (property liability damage) $50,000 limit for payment for damage to property of others

If you have artwork worth more than what is covered in your standard insurance policy, you should buy a(n):

personal property floater

Your parents house is insured for $400k. Their personal property is covered at 50% of insured value. How much of your personal property is insured? (potential answers 20,000, 200,000, 400,000, 2,0000)

20,000 (because Your parents are insured for 200kworthoftheirpersonalproperty(200k worth of their personal property (200kworthoftheirpersonalproperty(400k x 0.50)

• As dependent your personal property is insured at 10% of what your parents parents personal property is insured for)

Dependent Personal Property Coverage while away at school

• Your parents are insured for 200k worth of their personal property(200k worth of their personal property

• (200k worth of their personal property(400k x 0.50)

• As dependent your personal property is insured at 10% of what your parents parents personal property is insured for

times what they are covered by .10

#1: What's the worst way to make an investment decision?

Based solely on how a portfolio or investment has performed in the past

#2: HOW DO YOU FIGURE THE PRICE-TO-RENT RATIO

Median Sales Price ÷ Average annual rent for comparable property

• If this ratio is LESS than 15 then you should BUY

• If ratio is MORE than 20 then you should RENT

• If between 15-20 then things could either

IF YOU EXPECT TO STAY IN THE SAME PLACE FEWER THAN 5 YEARS, IT MAKES SENSE TO RENT YOUR PLACE OF RESIDENCE. WHY?

• If you plan on being in a particular house/location for less than 5-7 years, then it makes sense to rent.

• There are costs associated with getting a mortgage, paying attorney fees, realtor costs.

• More flexibility when you rent. Can leave much quicker and more easily.

find the price to rent ratio from the following info : EXAMPLE

2,500 - 3,000 square foot house in South Burlington - 3 bedroom/2 bath

Sales Price = $450,000

Monthly Rent = $2,800

Annual Rent = $33,600

Price to Rent Ratio:

$450,000 ÷ $33,600 = 13.4

so right now it makes sense to buy this type of house instead of renting

• Duplex:

• Building with separate homes - owned by same person.

• Condominium:

• Individually owned housing in a building.

• Manufactured House:

• Assembled in a factory and then moved to the property.

What is the most important factor when buying a home?

LOCATION