An investor can create the effect of leverage on his/her account by: I) buying equity of a levered firm; II) investing in risk-free debt like T-bills; III) borrowing on his/her own account Multiple Choice A) III only B) II only C) I and III only D) I only
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An investor can create the effect of leverage on his/her account by:
- I) buying equity of a levered firm;
- II) investing in risk-free debt like T-bills;
- III) borrowing on his/her own account
A) III only
B) II only
C) I and III only
D) I only
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- Which of the following has/have the main responsibility of regulating the life, health, and property and casualty insurance industry? a) the U.S. Treasury O b) the Federal Deposit Insurance Corporation (FDIC) Oc) a State insurance commission d) all of the above e) only (b) and (c) of the aboveRisk can be defined as the effects of uncertainty on objectives and often manifests itself in risk to property and ownership, operations and ….. of funds. A) flow B) outflowA contract of insurance to indemnify the insured in the event of loss will NOT provide which one (1) of the following forms of payment to the insured? OA) Compensation for the loss or expenses incurred. OB) Reimbursement for the amount of the loss up to the limit of the policy. C) Restoring the insured as nearly as possible to his/her position before the loss. D) Reimbursement for the replacement cost of the property damaged or destroyed.
- F4. The case of transaction exposure is described as follows. Choose the correct answer in the parenthesis in the description of the case. The choice is in bold letters. My company (a U.S. company) bought a product from a German co., and purchasing department signed a contract to pay Euro 10,000 3 month later. The sales contract is delivered to my desk. I, a treasurer, am wondering how much USD my co. needs to pay the bill of Euro 10,000 3 months from now. The currency market is in turmoil, I need to use more USD when USD (strengthens/ weakens) against EUR in the next 3 months. Market anticipates weak USD. However, if USD (strengthens/ weakens) more than market expects, I will need more USD to pay the bill EUR 10,000. Are there any possibility to limit my USD payment to a certain level, or at maximum. In that way, my USD payment will not get any higher even though USD slides more than the rate I can contract (buy EURO/sell EURO) now. How and what kind of contracts are available…Question 8 The January 2023 S&P 500 cash index is 3950 points while the S&P 500 futures March 2023 index is 4000 and the contract value of each index point is $150. You are convinced the futures market will fall 20% by expiry. You are only prepared to buy or sell one futures contract.(8 points) A taxpayer (of a particular profile) can either comply with the IRS code, orcheat and receive some benefit. The IRS can either audit the taxpayer at a cost or donothing. If the taxpayer cheats and the IRS audits then the tax payer faces penalty (fineplus possibly jail time) and the IRS receives the fine. The payoff matrix:IRSAudit (q) Not Audit (1-q)Cheat (p) -50000, 4000 1000, 0Tax PayerComply (1-p) -500, -300 0, 0Assume the tax payer cheats with probability p and complies with probability 1 − p, andIRS audits with probability q and does not audit with probability 1 − q. Find the mixedstrategy Nash equilibrium. Express probabilities in percentage forms and keep two digitsafter the decimal point, for example p = 2.34%.
- 4. Anentrepreneurintends to sell his product for 6.4$ each. The daily cost or expenses can be expressed as x+9.1+.11x^2, wherexis the no. of product sold daily. Find the no. of products that will maximize the profit per day.The Federal Reserve Board has a significant influence over the level of economic activity, inflation, and interest rates in the United States.(a) True(b) False.Recognize theprincipal–agentproblem arising frommoral hazard in equitycontracts and summarize the methods forreducing it.