1. For each of the following examples of product liability cases, explain what type of defect is being alleged.
a. Liability of an off-road auto manufacturer for failing to install a roll bar to minimize injuries if the vehicle overturns. b. Liability of a baby food manufacturer for pieces of glass found inside some of the jars. c. Liability of a pharmaceutical company for side-effects of a drug.
2. What is the impact of the United States Tax Code on the amount of capital held by insurers?
3. Describe the similarities between "segregation of exposures units" and risk pooling.
Proctored Final Examination
4. (a) List the six coverages provided in the Homeowner's 3 policy.
(b) Describe the difference between "named perils" and "open perils" coverage basis.
5. John's employer offers a qualified 401(k) plan and will match John's contributions up to a limit of 3% of his salary. John's salary is $20,000 and he contributes 3% the first year. Assuming that all contributions are made at the end of the year, the plan earns a 15% pre-tax return, and that John is in the 28% tax bracket, how much will he have in the plan at the end of one year? What is John's realized rate of return?