Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
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Chapter 10, Problem 1FPC
The Johnsons Decide How to Manage Their Risks
Several years have passed since the Johnsons were married, and their financial affairs have become more complicated. They recently purchased a $200,000 condominium that has added only about $400 per month to their housing expenses. And they have purchased a second used car for $12,000. As a result of these changes, Harry and Belinda realize that they now face greater risks in their financial affairs. They have decided to review their situation with an eye toward managing their risks more effectively. Use the steps in the risk-management process (pp. 300–302), their net worth and income and expense statements in Table 3-6 on page 97 and Table 3-7 on page 98, and other information in this chapter to answer the following questions:
- What are Harry and Belinda’s major sources of risk from home and automobile ownership, and what is the potential magnitude of loss from each?
- Given the choices listed in Step 3 of the risk-management process, how should the Johnsons handle the sources of risk listed in part a?
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