The Mathematics of Money

Copyright © 2008, The McGraw-Hill Companies, Inc.

Appendix A Answers to Odd-Numbered Exercises 653

31. Entire claim would be covered.


32. $714,286


33. $1725


34. $0.40


35. $360,000; $0


36. a) $153.86, b) $172.32


37. $50.17 semiannually


38. $2,925

Chapter 13 Section 13.2

1. $260


2. $1,308


3. $7,720


4. $40


5. $25,500


6. S $201.27, D $402.54, F $655.42


7. $6,911.10


8. S $333.50, F $858.20


9. S $227.90, F $483.55


10. No. If even a couple of employees become
    seriously ill and run up large claims, the
    company’s costs could soar. The group is
    not large enough to rely on the law of large
    numbers.


11. S $55.95, F $255.92


12. S $25.60, F $150.59


13. $952


14. Traditional S $0, F $308.97; POS S $0,
    F $206.46


15. The last one, because it makes the employees pay
    more of, and therefore feel, the cost difference.
    This gives employees more incentive to choose the
    lower cost plan.


16. If employees have to pay too much, some
    may choose to not take the coverage. The
    healthiest people are the most likely to do this,
    leaving the insurer with almost the same
    claims costs, but less premium to cover
    them.

Chapter 13 Section 13.3

1. $161.50


2. $29.21


3. $221.32


4. $48.49


5. $510.63


6. $325.50


7. $102.08


8. $444.88


9. $2,400


10. $8250 paid-up death benefi t


11. 17 years and 19 days of continued term
    coverage


12. $294,208
    25. a) $35.18, b) $32.19, c) $7,200.16
    27. $2,141.55
    29. Universal

Chapter 14 Section 14.1

1. $8,500 per year


2. $7500 in 10 years


3. $187,500


4. $2,500,000; no


5. $62,500


6. $2,416,667


7. Landscape company
   $5,000; property
   management $21,429; property management
   is more attractive


8. 8.22%

Chapter 14 Section 14.2

1. 7 years


2. 8 months


3. $2,750


4. 6.65 years


5. 8 visits


6. Just over 9 months


7. $195


8. Dynamic  42.55 hours; comprehensive 
   67.04 hours


9. Not necessarily. If the company knows that it will
   use several hundred hours of tech support, the
   comprehensive plan would be less expensive and
   thus a better choice.

Chapter 15 Section 15.1

1. $1,532.12


2. $268.28


3. $1,273.60


4. $823.60


5. $429.00


6. a) $781.30, b) $381.30


7. $6,169.00


8. a) $1,791.67, b) $11,224.17


9. $847.51


10. $974.61


11. $716.05


12. $564.87


13. 
    $19.66 (would receive of $19.66
    extra pay)


14. $4,386.90


15. a) $1,216.80, b) $93.09, c) $1,023.51


16. a) $957.60, b) $73.26, c) $850.14


17. a) $883.50, b) $61.12, c) $707.65


18. $478.75


19. Each cafeteria plan “dollar” buys more than $1
    worth of benefi ts.

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