Answer:
d) 89.0
Explanation:
The value of the company today is the present value of its cash flows in perpetuity which is the cash flows divided by the required rate of return.
value of the firm=$1000/10%=$10,000
share price=value of the firm/shares outstanding
share price=$10,000/100=$100
number of shares to be repurchased=$1000/$100=10
number of shares after repurchase=100-10=90
note that when 90.91 is rounded to a whole, it turns out to be 92 while 89 is rounded to 90
Parker is a highly skilled sales person at Byberry, which is a 30-year-old company that has grown significantly in terms of revenue and product offerings. It sponsors a pension plan that provides a benefit of 2% times the years of participation times the average of the final three years of salary. Parker has worked for Byberry for the last 30 years and earned $200,000 two years ago, $150,000 last year, and $250,000 this year. If he is retiring this year, how much should he expect to receive as a pension benefit?
Answer:
$120,000
Explanation:
The retirement benefit that Parker expects is
2% x number of years worked( 30 ) x {($200,000 +$150,000 +$250,000) /3}
=2/100 x 30 x (600,000/3)
=0.02 x 30 x $200,000
=0.6 x $200,000
=$120,000
The transshipment problem: a. Is the special case of LP problem. b. Can be modeled using the transportation algorithm. c. Can be solved to optimality by manual methods. d. Is the most general type of network flow problems.
Answer:
Option "A" is the correct answer to the following question.
Explanation:
The transshipment issue is the particular case of the issue of LLP.
A special Linear Programming Problem is a transshipment problem because it approaches the premise that products can both be obtained and delivered at the very same time by both recovery and recycling.
How much will Marie have in her retirement account in years if her contribution is $ per year and the annual return on the account is %? How much of this amount represents interest? The amount Marie will have is:_________
Answer:
The amount is constant so is an annuity and the value at the end of 10 years is the future value of an annuity.
Future value of annuity = Annuity * Future value interest factor of annuity, 10 years, 6%
= 7,000 * 13.1808
= $92,265.60
Value at the end of 10 years is $92,265.60.
The interest is;
= 92,265.60 - (7,000 * 10 years)
= 92,265.60 - 70,000
= $22,265.60
The relevant production range for Challenger Trailers, Inc. is between 120,000 units and 190,000 units per month. If the company produces beyond 190,000 units per month:__________. A. the fixed costs and the variable cost per unit will not change B. the fixed costs may change, but the variable cost per unit will remain the same C. the fixed costs will remain the same, but the variable cost per unit may change D. both the fixed costs and the variable cost per unit may change
Answer: D. both the fixed costs and the variable cost per unit may change
Explanation:
It is said that Fixed costs do not change regardless of production level but this is not entirely true. Fixed costs usually do not change for a production range but if the range is passed, the fixed costs might then increase and a new fixed cost for the new relevant range will be charged.
Variable costs are variable because they change with production so if the company is producing more units, they will be incurring more variable costs.
In conclusion therefore, if the company produces more units than its relevant production range, it risks both fixed and variable costs changing.
The production possibilities curves suggest that rev: 09_17_2020_QC_CS-228777 Multiple Choice West Mudville should specialize in, and export, both baseballs and baseball bats. workers will try to immigrate from West Mudville to East Mudville. West Mudville should specialize in, and export, baseball bats. East Mudville should specialize in, and export, baseball bats.
Answer: West Mudville should specialize in, and export, baseball bats.
Explanation:
Each country should specialize in the good that it has a lower opportunity cost in producing.
West Mudville
Opportunity cost of producing baseball bats = 9/9 = 1 baseball
Opportunity cost of producing baseball = 9/9 = 1 baseball bat
East Mudville
Opportunity cost of producing baseball bats = 8/4 = 2 baseballs
Opportunity cost of producing baseball = 4/8 = 0.5 baseball bats
From the above, West Mudville has a lower opportunity cost than East Mudville in the production of baseball bats and so it should specialize in and export that.
In a SWOT analysis, what are strengths?
Answer:
A SWOT analysis is an evaluation of your company's strengths, weaknesses, opportunities, and threats.
Explanation:
The SWOT approach is a useful tool to support various brainstorming sessions due to its benefits, such as its ability to address a variety of business difficulties.
What is SWOT analysis?Strengths, Weaknesses, Opportunities, and Threats is referred to as SWOT. Your company's internal strengths and weaknesses are factors over which you have some control and which you can make changes. Examples include your team members, your intellectual property and patents, and your location.
A SWOT analysis is a strategic planning tool that assists businesses in gaining a comprehensive understanding of their key difficulties and in choosing actions that will actually support their success.
The acronym stands for the four principles of strengths, weaknesses, opportunities, and threats in English.
An organization or project's strengths, weaknesses, opportunities, and threats are identified using a SWOT analysis, a planning technique.
With this approach, you concentrate your analysis on the three Cs, or strategic triangle, which are the company, the competitors, and the customers.
Finding the key success factor (KSF) and developing a workable marketing strategy can both be accomplished by carefully examining these three components.
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If your company matches 75 cents on the dollar,and you contribute $200 a paycheck, how much will your employee match?
Blue Spruce Corp. started the year with total assets of $304000 and total liabilities of $244000. During the year the business recorded $630000 in revenues, $325000 in expenses, and dividends of $61000. The net income reported by Blue Spruce Corp. for the year was:_____________
Answer:
$305,000
Explanation:
Net income is the amount of money available to a company after the deduction of expenses from revenue. It is calculated as;
Net income = Revenues - Expenses
Given that;
Revenues = $630,000
Expenses = $325,000
Net income = $630,000 - $325,000
Net income = $305,000
Therefore the net income reported by Blue Spruce Corp. For the year is $305,000
How Many Pints of Blackberries?
The pleasure you get from each pint of freshly picked blackberries is $2.00. It takes you 12 minutes to pick the first pint, and each additional pint takes an additional 2 minutes (14 minutes for the second pint, 16 minutes for the third pint, and so on). The opportunity cost of your time is $0.10 per minute.
a. How many pints of blackberries should you pick? Illustrate with a complete graph.
Answer:
none because they could be poiseness
Explanation:
A country's currency is said to be _____ when the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it.
A) externally convertible
B) nonconvertible
C) internally convertible
D) freely convertible
Answer:
D) freely convertible
Explanation:
Since in the question it is mentioned that the country government permits to both residents and non-residents for acquiring the non-limited values of the foreign currency so this represents the freely convertible.
As in the case of freely convertible the currency should be traded without having any kind of limitations that are imposed by the monetary authorties
Hence, the correct option is D.
It is estimated that the annual maintenance cost of a statue erected in front of a public building in a state capital would be $1,000. Assuming an interest rate of 4% compounded annually, determine the capitalized cost for maintaining the statue.
Answer:
$24,630.54
Explanation:
Calculation to determine the capitalized cost for maintaining the statue
First step is to calculate the Effective interest rate
Effective interest rate = (1+.04/4) ^4 -1
Effective interest rate= 0.04060
Last step is to calculat the capitalized cost for maintaining the statue using this formula
Capitalized cost =Annual maintenance cost /Effective interest rate
Let plug in the formula
Capitalized cost = ($1,000/0.04060)
Capitalized cost = $24,630.54
Therefore the capitalized cost for maintaining the statue will be $24,630.54
Mike Finley wishes to become a millionaire. His money market fund has a balance of $403,884 and has a guaranteed interest rate of 12%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000?
Assume that Sally Williams desires to accumulate $1 million in 15 years using her money market fund balance of $209,004. At what interest rate must Sallyâs investment compound annually? (Round answer to 0 decimal places, e.g. 5%.)
Answer:
Mike Finley
t = 7.999983133 years rounded off to 8 years
Sally Williams
r = 0.110000123 or 11.0000123% rounded off to 11.00%
Explanation:
Mike Finley
To calculate the time period it will take Mike Finley to become a millionaire, we will use the formula of future value of cash flow. The formula for future value of cash flow is as follows,
Future value = Present value * (1+r)^t
Where,
r is the interest rate or rate of returnt is the time period in yearsPlugging in the values for Future value, present value and r in the formula, we can calculate the t to be,
1000000 = 403884 * (1+0.12)^t
1000000 / 403884 = 1.12^t
2.475958444 = 1.12^t
Taking log on both sides.
ln(2.475958444) / ln(1.12) = t
t = 7.999983133 years rounded off to 8 years
Sally Williams
We will use the same formula for future value of cash flows as we used above to calculate the rate at which investment should be compounded annually to grow to $1 million.
1000000 = 209004 * (1+r)^15
1000000 / 209004 = (1+r)^15
4.784597424 = (1+r)^15
Taking root of 1 on both sides.
(4.784597424)^1/15 = (1+r)^15 * 1/15
1.110000123 = 1+r
1.110000123 - 1 = r
r = 0.110000123 or 11.0000123% rounded off to 11.00%
Why is it important to choose a bank that is a member of the FDIC? a. The FDIC is the regulatory body that licenses banks, so a non-FDIC bank is illegal. b. The FDIC is a union that prevents banks from taking advantage of customers, so you will receive better service with an FDIC bank. c. The FDIC is a government bureau that insures the money that customers deposit in the bank, so your money is safer in an FDIC bank. d. Only FDIC banks are legally allowed to issue loans, so if you ever anticipate needing a loan, you will need to use an FDIC bank. Please select the best answer from the choices provided A B C D
Answer:
(C) The FDIC is a government bureau that insures the money that customers deposit in the bank, so your money is safer in an FDIC bank.
Explanation: I completed the test and got a 100 on EDG. 2020
Answer:
c
Explanation:
A firm issued 10,000 shares of $2 par-value common stock, receiving proceeds of $40 per share. The amount recorded for the paid-in capital in excess of par account is ________.A) $0 in the Common Stock account.
B) $0 in the Paid-in Capital in Excess of Par account.
C) $400,000 in the Common Stock account.
D) $400,000 in the Paid-in Capital in Excess of Par account.
Answer:
the amount recorded for the paid-in capital in excess of par account is $380,000
Explanation:
The computation of the amount of paid in capital in excess of par account is shown below:
= Number of shares issued × (per share value - par value of the common stock)
= 10,000 shares × ($40 - $2)
= 10,000 shares × $38
= $380,000
Hence, the amount recorded for the paid-in capital in excess of par account is $380,000
The options that are given are wrong
Banks and other financial institutions can grant a small business a _____, which is an agreement by which a financial institution promises to lend a business a predetermined sum on demand. a. mutual fund.b. line of credit.c. non-recourse loan.d. trust fund.e. trade credit.
Answer:
b. line of credit
Explanation:
line of credit can be regarded as credit facility that is been offered to customer as well as businesses so that when ever they need funds they can draw on it. Line of credit can be offered by the government, bank as well as individual. Line of credit gives room to customer for accessibility of funds anytime so far the limit has not been exceeded. It should be noted that a line of credit is an agreement by which a financial institution promises to lend a business a predetermined sum on demand,
The NASDAQ stock market bubble peaked at 5,445 in 2000. Two and a half years later it had fallen to 1,285. What was the percentage decline?
Answer:
76.40%
Explanation:
Calculation for What was the percentage decline
Using this formula
Percentage decline=+Fallen stock market bubble-Peaked stock market bubble)÷Peaked stock market bubble
Let plug in the formula
Percentage decline=(1,285 - 5,445) ÷5,445
Percentage decline=-4,160÷5,445
Percentage decline=-0.7640*100
Percentage decline=-76.40%
Therefore the percentage decline will be -76.40%
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2021, accounts receivable totaled $665,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $40,000 at the beginning of 2021 and $25,000 in receivables were written off during the year as uncollectible. Also, $2,000 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 15% to accounts receivable at the end of the year.
Required:
Prepare journal entries to record the write-off of receivables, the collection of $2,000 for previously written off receivables, and the year-end adjusting entry for bad debt expense.
Answer:
Bad debt expenses is $82,750
Explanation:
Recording the write off receivables
Date Account Titles and Explanation Debit Credit
Allowances for uncollectible accounts $25,000
Accounts receivables $25,000
(To write off an uncollectible amount)
Recording the reinstatement of an account previously written off
Date Account Titles and Explanation Debit Credit
Account receivables $2,000
Allowances for uncollectible accounts $2,000
(To reinstatement of an account previously written off)
Recording collection of account previously written off
Date Account Titles and Explanation Debit Credit
Cash $2,000
Account receivables $2,000
(To record the cash received)
Recording bad debt expenses for the year
Date Account Titles and Explanation Debit Credit
Bad debt Expenses $82,750
Allowances for doubtful accounts $82,750
(To record estimated bad debts)
Workings
Particulars Amount
Beginning balance $40,000
Less: Receivables write off $25,000
Add: Collection of receivables $2,000
previously written off
$17,000
Less: Required allowances $99,750 ($665,000*15%)
Bad debt expenses $82,750
Thus, the bad debt expenses is $82,750
The time value of moneyConsider the following scenarios:Simon FamilyThe Simons have saved $5,000 towards their goal to have $45,000 for a down payment on a house in 6 years. They will put the $5,000 in an account along with money they will deposit annually. They donât know how much that annual deposit should be, so theyâve asked you to calculate it. They have found a savings institution that will pay 6% interest.Perkette FamilyThe Perkettes have set a goal to have $45,000 for a down payment on a house in 6 years. They have not saved anything so far. They have asked you to calculate how much they will need to put away each year to achieve their $45,000 down-payment goal. They have found a savings institution that will pay 6% interest.Use the scenarios along with the following factor table data. Note that the complete Future Value and Future Value Annuity tables (as well as the Present Value and Present Value Annuity tables) are located in the appendix in your text.Table of Future Value Factors:Interest RateYear 5% 6% 8%1 1.050 1.060 1.0802 1.102 1.120 1.1663 1.158 1.190 1.2604 1.216 1.260 1.3605 1.276 1.340 1.4696 1.340 1.420 1.5878 1.477 1.590 1.85110 1.629 1.790 2.159Table of Future Value Annuity Factors:Interest RateYear 5% 6% 8%1 1.000 1.000 1.0002 2.050 2.060 2.0803 3.152 3.180 3.2464 4.310 4.380 4.5065 5.526 5.630 5.8676 6.802 6.970 7.3368 9.549 9.890 10.63710 12.578 13.180 14.4871. What is the amount of money the Simons will need to deposit annually (rounded to the nearest two decimal places) to achieve their down-payment goal?2. What is the amount of money the Perkettes will need to deposit annually (rounded to the nearest two decimal places) to achieve their down-payment goal?
Answer:
annual payment = $5,496.25
Explanation:
the $5,000 that they deposit today will be worth $5,000 x (1 + 6%)⁶ = $6,691.13 in 6 years.
this means that they need to save an extra $45,000 - $6,691.13 = $38,308.87
we can calculate the amount that they need to deposit at the end of every year to have $38,308.87 in 6 years by using the future value of an annuity formula:
FV = payment x annuity factor
payment = FV / annuity factor
FV = $38,308.87 FV annuity factor, 6%, 6 periods = 6.970annual payment = $38,308.87 / 6.97 = $5,496.25
Custom Cars purchased some $39,000 of fixed assets two years ago that are classified as 5-year MACRS property. The MACRS rates are 20 percent, 32 percent, 19.2 percent, 11.52 percent, 11.52 percent, and 5.76 percent for Years 1 to 6, respectively. The tax rate is 34 percent. If the assets are sold today for $19,000, what will be the aftertax cash flow from the sale?
Answer:
$18,904.80
Explanation:
Calculation for what will be the aftertax cash flow from the sales
First step is to calculate the Accumulated Depreciation
Accumulated Depreciation = (0.2 + 0.32)*39,000 Accumulated Depreciation= 0.52*39,000
Accumulated Depreciation = $20,280
Second Step is to calculate the Book Value using this formula
Book Value = Initial Cost –Accumulated Depreciation
Let plug in the formula
Book Value = $39,000 - $20,280
Book Value = $18,720
Third step is to calculate the profit using this formula
Profit = Sales value–Book Value
Profit= $19,000 - $18,720
Profit = $280
Fourth Step is to calculate the taxes
Taxes = 0.34*280
Taxes = $95.20
Last step is to calculate the aftertax cash flow from the sale using this formula
Aftertax cash flow from the sale=Assets sold today-Taxes
Let plug in the formula
Aftertax cash flow from the sale= 19,000 - $58.80
Aftertax cash flow from the sale= $18,904.80
Therefore the Aftertax cash flow from the sale will be $18,904.80
When the bond sells at par, the implicit €/$ exchange rate at maturity of a Euro/U.S. dollar dual currency bond that pays $651.25 at maturity per €1,000, is:________ A) €1.54/$1.00. B) €1.22/$1.00. C) €1.79/$1.00. D) €1/$1.00.
Answer:
€1.54/$1.00
Explanation:
When the bond sells at par, the implicit €/$ exchange rate pays €651.25 at maturity per €1000
651.25/1000= 1/x
Cross multiply
651.25x = 1000
x= 1000/651.25
x= 1.54
Hence the implicit exchange rate is €1.54/$1.00
Ruby operates a hobby supply store. She maintains her books using the cash method. At the end of the year, her accountant computes her accrual basis income that is used on her tax return.
For 2020, Ruby had cash receipts of $840,000, which included $100,000 collected on accounts receivable from 2019 sales. It also included the proceeds of a $50,000 bank loan. At the end of 2020, she had $175,000 in accounts receivable from customers, all from 2020 sales. Ruby paid cash for all of the purchases. The total amount she paid for merchandise in 2020 was $560,000. At the end of 2019, she had merchandise on hand with a cost of $45,000. At the end of 2020, the cost of merchandise on hand was $80,000.
1. Ruby's accrual basis gross receipts for 2020 are_______ $ .
2. The cost of goods sold for 2020 under the accrual method is________ $ .
3. The gross profit from merchandise sales for 2020 under the accrual basis is________ $ .
Answer:
Ruby
1. Ruby's accrual basis gross receipts for 2020 are_______ $740,000.
2. The cost of goods sold for 2020 under the accrual method is________ $525,000.
3. The gross profit from merchandise sales for 2020 under the accrual basis is________ $340,000.
Explanation:
a) Data and Calculations:
2020 Cash receipts = $840,000
2019 accounts receivable (100,000)
Bank loan (50,000)
Receipts from customers $690,000
Bank loan 50,000
Gross receipts $740,000
Receipts from customers $690,000
plus accounts receivable 175,000
Total sales for 2020 $865,000
Beginning inventory (2019) = $45,000
Amount paid for purchases = $560,000
Ending inventory (2020) = $80,000
Cost of goods sold = $525,000
Total sales for 2020 $865,000
Cost of goods sold 525,000
Gross profit = $340,000
A 20-year maturity bond with face value of $1,000 makes annual coupon payments and has a coupon rate of 9.40%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.)
a. What is the bondâs yield to maturity if the bond is selling for $1,040?
Yield to maturity %
b. What is the bondâs yield to maturity if the bond is selling for $1,000?
Yield to maturity %
c. What is the bondâs yield to maturity if the bond is selling for $1,240?
Yield to maturity %
Answer and Explanation:
The computation of the yield to maturity is shown below:
a. When the bond sale price is $1,040
Given that
FV = $1,000
PV = $1,040
PMT = $1,000 × 9.40% = $94
NPER = 20
The formula is shown below:
= RATE(NPER;PMT;-PV;FV;TYPE)
After applying the above formula, the yield to maturity is 8.9630%
b. When the bond sale price is $1,000
Given that
FV = $1,000
PV = $1,000
PMT = $1,000 × 9.40% = $94
NPER = 20
The formula is shown below:
= RATE(NPER;PMT;-PV;FV;TYPE)
After applying the above formula, the yield to maturity is 9.4%
c. When the bond sale price is $1,240
Given that
FV = $1,000
PV = $1,240
PMT = $1,000 × 9.40% = $94
NPER = 20
The formula is shown below:
= RATE(NPER;PMT;-PV;FV;TYPE)
After applying the above formula, the yield to maturity is 7.1144%
Sperry Company had beginning inventory of $80,000, purchased merchandise during the period for $140,000, and had ending inventory of $95,000. How much was goods available for sale? A. $175.000 B. $155,000 C. $315,000 D. $125,000 E. None of these
Answer:
cost of goods available for sale= $220,000
Explanation:
Giving the following information:
Beginning inventory of $80,000
Purchased merchandise for $140,000
To calculate the cost of goods available for sale, we need to use the following formula:
cost of goods available for sale= beginning inventory + purchase
cost of goods available for sale= 80,000 + 140,000
cost of goods available for sale= $220,000
All of the following are true regarding long-term notes payable except:
a.The note’s carrying value at any time equals its face value minus any unamortized discount or plus any unamortized premium.
b.Notes payable are usually issued by a single lender.
c.The market rate of interest at the time of issuance determines the periodic cash payment amount.
d.Over the life of the note, the interest expense allocated to each period is computed by multiplying the market rate by the beginning-of-period balance.
e.The equal total payments pattern has changing amounts of both interest and principal.
A long-term note is a promissory note that reflects a loan from a bank or other creditor, option c. is not a long-term note.
What does it mean to have a long-term note?A long-term note is a promissory note that reflects a loan from a bank or other creditor, but a bond is a more complicated financial instrument that typically entails debt to a number of creditors.
Option c. The periodic cash payment amount is determined by the market rate of interest at the time of issuance.
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Phillips Co. currently pays no dividend. The company is anticipating dividends of $.02, $.05, $.10, $.20, and $.30 over the next 5 years, respectively. After that, the company anticipates increasing the dividend by 3.5 percent annually. One step in computing the value of this stock today is to compute the value of:_________
a) P5.
b) P3.
c) P1.
d) P6.
e) P4.
Answer:
a) P5.
Explanation:
The formula to calculate the current price stock is as follow:
P0 = D1/(1+Ke)^1 + D2/(1+Ke)^2 + D3/(1+Ke)^3 + D4/(1+Ke)^4 + D5/(1+Ke)^5 + P5/(1+Ke)^5
The Price of share is P
The dividend is D
The required rate of return is Ke
Swifty uses the periodic inventory system. For the current month, the beginning inventory consisted of 7300 units that cost $11.00 each. During the month, the company made two purchases: 2800 units at $12.00 each and 12200 units at $12.50 each. Swifty also sold 13100 units during the month. Using the average cost method, what is the amount of cost of goods sold for the month? (Round average cost per unit to 2 decimal places, e.g. 1.48.)
1- $156545.
2- $157200.
3- $151400.
4- $163300.
Answer:
1. $156545.
Explanation:
Average cost of inventory = {(7300 x $11) + (2800 x $12) + ($12200 x $12.50)}/(7300 + 2800 + 12200)
Average cost of inventory = $80300 + $33600 + $152500)/22300
Average cost of inventory = $11.95 per unit
Cost of goods sold = Units sold * average cost per unit
Cost of goods sold = 13,100 * $11.95
Cost of goods sold = $156,545
________ is a crime in which an imposter obtains key pieces of personal information to impersonate someone else.
A) Identity theft
B) Spoofing
C) Social engineering
D) Evil twins
Answer:
A)Identity theft
Explanation:
I hope it helps you
The police chief mentions that unionized emergency personnel had already been deployed, so pulling them back would not be worth it. However, there may be long term savings in pulling them back. If the police chief is looking solely at short-term costs and benefits, what type of decision-making bias would this represent? a) discounting the future b) traming effects c) illusion of control d) representativeness
Answer:
a) discounting the future
Explanation:
Police chief mentions that unionized emergency personnel and When police superiors look only at short-term costs and benefits, decision-making bias discounts the future in this case because it is a bias such as prioritizing the present, rejecting it, or avoiding future going. Long-term effect.so that here the correct option is a) discounting the futureArturo and Dina are married with two dependents. They enrolled in a qualified plan through the Marketplace at a cost of $2,700 per year. Their household income was $31,000. Their SLCSP premium is $3,600. What is their premium tax credit?
Answer:
$2,261
Explanation:
I calculated this tax credit using 2019 information:
household income = $31,000
household income as a % of poverty line = $31,000 / $25,100 = 123.5%
applicable percentage = 4.32%
required contribution = $31,000 x 4.32% = $1,339.20 ≈ $1,339
SLCSP = $3,600
SLCSP - required contribution = $3,600 - $1,339 = $2,261
$2,261 ≤ $2,700 (cost of qualified plan)
we must choose the lower between $2,261 and $2,700 ⇒ $2,261
What is an Umbrella Policy? How does it work?
Answer:
An umbrella policy is the type of insurance that is made to additionally secure personal liability and it is necessary to have if the person is responsible for some damage made.
Explanation:
Umbrella policy not only covers the policyholder, but it also covers the members of his family. If you are responsible for the car accident, and your car is covered with the umbrella policy, they will be responsible for covering the medical expenses in case of someone getting hurt.