1. In the typical homeowners policy, fire is a covered peril. Most likely, some cash will burn up in the fire if your house burns down. Which of the following is NOT a true statement about the $200 limit on cash in most homeowners insurance policies?
a. It prevents moral hazard; people could attempt to profit from a fire if this limit were not in the policy.
b. It discourages people from storing large amounts cash at home, thereby reducing risk.
c. It is just another way that insurance companies try to cheat people.
d. Most people do not need more coverage than this limit.
e. It is difficult to verify the loss.
2. Axl will be borrowing $150,000 today to buy a house, and he will pay it back with 20 yearly payments starting one year from today. If the effective annual interest rate is 9%, how much will the final payment be if the annual payments are constant?
a. $19,500
b. $16,400
c. $19,000
d. $17,200
e. $15,000