The Johnsons Decide How to Manage Their Risks Six years have passed since the Johnsons...
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The Johnsons Decide How to Manage Their Risks Six years have passed since the Johnsons were married, and their financial affairs have become much more complicated. Both Harry and Belinda are earning about 30 percent more at work. They have purchased a $140,000 condominium that has added about $400 per month to their housing expense. And they have purchased a second car for $3200. 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. 290, 292), their net worth and income and expense statements at the end of Chapter 3 (on pages 99100), and other information in this chapter to answer the following questions: (a) 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? (b) 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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