It is estimated that there are 35 deaths for every 10 million people who use airplanes. A company that sells fight insurance provides $100,000 in case of death in a plane crash. A policy can be purchased for $1. Calculate the expected value and thereby determine how much the insurance company can make over the long run for each policy that it sells. The expected value is $ (Round to the nearest cent)
Q: A rancher is considering the purchase of additional land to expand operations. He can operate an…
A: We will have to prepare a net present value analysis table for a period of 3 years to analyse the…
Q: A bond has $1,000 face value, coupon rate of 7.3%, and yield to maturity (YTM) of 10.7%. It will…
A: A bond indicates a debt instrument that allows the issuer to raise funds from the public and also…
Q: Find the future value of the following ordinary annuities. Payments are made and interest is…
A: Future value refers to an amount of the current asset at some future date affected by interest…
Q: You put $53,330 into an investment account that earns 10.6% compounded semi- annually for the first…
A: To calculate the amount in the investment account after the first 8 years, we can use the formula…
Q: Avicorp has a $10.3 million debt issue outstanding, with a 6.2% coupon rate. The debt has…
A: The cost of debt is the yield to maturity of a bond. It is the rate at which borrowed funds can be…
Q: Bio-Plasma Corporation is growing at 31% per year. It is all-equity-financed and has total assets of…
A: Actual growth rate = g = 31% Total assets = ta = $2.7 million Return on equity = roe = 22% plowback…
Q: Amalgamated Consolidated has a beta of 2.05. Assuming a risk free rate of 3.45% and a market risk…
A: CAPM is the method of calculating the expected return on investment. The expected return is the…
Q: Financial performance measures are essential tools used by managers to evaluate the financial health…
A: Return on Investment (ROI) is a measure of the profitability of an investment. It is calculated by…
Q: Caleb purchased a house for $300,000. He made a down payment of 25.00% of the value of the house and…
A: Loan: It represents the amount that will be borrowed by the borrower for the purpose of expanding…
Q: b. C. What are the company's capital structure weights on a book value basis? (Do not round…
A: First we need to determine the book value and market value of each source of capital. Book value…
Q: National Manufacturing Company is considering buying some new equipment that would allow for…
A: Initial cost = -$400,000 Time = t = 4 years Rate of return = r = 14% Depreciation = $100,000 Net…
Q: A lender is willing to offer an 70% LTV convertible mortgage to a borrower that is using it to…
A: The effective yield of a loan is the actual rate of return earned by a lender on a loan, taking into…
Q: a) Calculate the maximum exchange ratios Maxi ltd should agree if it expects no dilution in the…
A: To determine the maximum exchange ratio without the dilution of EPS of Maxi, we need to follow the…
Q: urth year wh
A: Here given Initial investment =$135000, on excel take it as negative, and cash flows from 1st year…
Q: 39: Using the following closing prices and dividends compute the CWI (cumulative wealth index), the…
A: To compute the CWI, CPC, and CDY, we need to use the following formulas: CWI(t) = CWI(t-1) * (1 +…
Q: Ceal Corporation has 35.000 shares of common stock outstanding at a price per share of $85. The…
A: WACC refers to the Cost that the company paid to all its stakeholders. It is calculated by taking…
Q: Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently…
A: Here, Current Quoted Price is 125-100 Face Value of Future is $100,000 Interest Rate will go down in…
Q: Consider the following cash flows: Year Cash Flow 0 −$ 29,000 1 14,700 2 14,200 3 10,600 What is…
A: Profitability index is a measure ratio between present value of cashflows and the initial…
Q: A company is considering a new project with the following estimates: Price per Unit = $125; Variable…
A: A worst-case scenario is a concept used in risk analysis and management to describe the potential…
Q: Future Value of an Amount Present amount Number of periods Interest rate per period Future value fx…
A: We will solve all the four parts using excel formulas : Formula 1 : Future value of an amount
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: Here, Expected Return of Stock Fund (E(rE)) is 18% Expected Return of Bond Fund (E(rD))is 9%…
Q: Assume that the real risk-free rate is 3.5% and that inflation is expected to be 7% in Year 1, 5.5%…
A: We will calculate Market risk premium using the following formula:…
Q: Eagle Products EBITDA is $500, its tax rate is 21%, depreciation is $30, capital expenditures are…
A: Free cash flow to the firm is an important concept. It is used to identify the cash flow when net…
Q: prospectus for the Brazos Aggressive Growth fund, the fee table indicates that the fund has a 12b-1…
A: When expense is expressed as percentage, then expense in currency is expense percentage times total…
Q: Year Cash Flow (A) Cash Flow (B) 0 −$ 417,000 −$ 36,000 1 48,000 19,600 2 58,000 14,100 3 75,000…
A: The payback period refers to the time it takes a project to recover its initial costs. It does not…
Q: Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 9% coupon rate,…
A:
Q: Note: Round all answers to the nearest cent when necessary. Calculate the amount financed, the…
A: When funds are financed from outside, they carry a finance charge which is the cost of using those…
Q: 2. * A bond with a redemption value of £100 pays coupons of £1.50 semi-annually (i.e. the bond…
A: Price of a bond is the PV of future coupons and par value discounted at the YTM. Given the remaining…
Q: igour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever…
A: Yield To Maturity: It represents the expected rate on the bond by the bondholder if all the coupon…
Q: Consider how Frost Valley, a popular ski resort, could use capital budgeting to decide whether the…
A: Capital budgeting is the method according to which a business undertakes to evaluate potential major…
Q: Table 9.2 Average Returns for Bonds 1950 to 1959 1960 to 1969 1970 to 1979 1980 to 1989 1990 to 1999…
A:
Q: A 5-year bond has a coupon rate of 6.8% and pays coupons semi-annually. If the required return is…
A: The annual income a bondholder can expect while holding a bond is called the coupon rate. The value…
Q: CBA Offer Principal $10,000 with terms of 3 years Interest rate 7.2% pa compounding monthly,…
A: With mortgage, a series of equal periodic payments are made. This periodic payment includes the…
Q: As an investor, you have an opportunity to make an investment in real estate costing $100,000 today.…
A: The present value (PV) is $100,000. The monthly income (PMT) is $650. The period is 20 years and the…
Q: You are considering a project that will require an initial outlay of $54,200. This project has an…
A: Here, Required Rate of Return is 15%
Q: You are considering to purchase of Ohha, Inc. Stocks. The firm has just paid a dividend of P5.50 per…
A: Here, Current Dividend (D0) is P5.50 Price of Stock is P125 Growth Rate is 10% Required Return is…
Q: You are interested in a fixed-rate mortgage for $399,500 and need to choose the between options: a…
A: A mortgage indicates the sum borrowed to meet either the personal or business requirements. The…
Q: Calculate the profit or loss per share of stock to an investor who buys a call option on a stock…
A: The call options are financial contracts which gives the options buyer the right, (not obligation)…
Q: Advise on the main asset classes available in Zambia clearly showing the common investment time…
A: Mr. New Retiree is seeking advice on how to invest his retirement benefits of K2.5 million. As an…
Q: Ewing Corporation is evaluating an extra dividend versus a share repurchase. In either case, $10,000…
A: a) Extra dividend The share price after dividend is Stock Price=Current Stock Price-Amount…
Q: Comment the CAPM result of Apple over 2022 and 2021
A: The cost of equity is the return that the owners of the company expect. The cost of equity is…
Q: A stock price is currently $40. It is known that at the end of three months it will be either $45 or…
A: European put option refers to the profit earned from trading below the strike price for covering the…
Q: Four months ago, you purchased 1,225 shares of Consolidated Industries stock for $18.78 a share. You…
A: Information Provided: No. of shares purchased = 1225 Purchase price = $18.78 Dividend payment per…
Q: SuperSky Pic issued shares, where the covariance between the SuperSky Pic shares and the UK stock…
A:
Q: Amazon would like to get a floating rate loan $10,000,000. It can borrow at 7.92% or Libor + 1%. A…
A: Two unrelated questions appear on the screen. One of them is from the topic of fixed versus floating…
Q: You are evaluating a capital investment that promises in year 1 revenue of $480,000.00 with…
A: Free cash flow (FCF) is a measure of a company's financial performance that represents the cash flow…
Q: Zero-Coupon Bonds (ZCBS) with maturity in 1 and 5 years are available on the market. Their…
A: Forward rates are used by investors, traders, and financial institutions to manage their risks and…
Q: vcast inc is expected to grow at a constant rate of 9 percent. the compant will pay a dividend of…
A: Value of stock is calculated using following equation Stock worth = D1r-g Where, D1 is expected…
Q: Consolidated Industries has a beta of 1.34. Assuming the risk-free rate is 5.75 percent, and the…
A: Given the following: Beta = 1.34 Risk-free rate = 5.75% Return on market = 12.5%
Q: A borrower has been analyzing different adjustat borrower anticipates owning the property for five…
A: Adjustable rate Mortgage It is a mortgage where periodic interest rate is reset after each…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- 1. A 40 year old man in the U.S has a 0.242% risk of dying during the next year. An insurance company charges $260 per year for a life-insurance policy that pays a $100,000 death benefit. What is the expected value for the person buying the insurance? Round the answer to the nearest dollar.The Perpetual Life Insurance Company is trying to sell you an investment policy that will pay you and your heirs $19,500 per year forever. a. If the required return on this investment is 6.1 percent, how much will you pay for the policy? b. Suppose the Perpetual Life Insurance Company told you the policy costs $500,000. At what discount rate would this be a fair deal?The annual premium for a $5,000 insurance policy against the theft of a painting is $250. If the (empirical) probability that the painting will be stolen during the year is 0.01, what is your expected return from the insurance company if you take out this insurance? Let X be the random variable for the amount of money received from the insurance company in the given year.
- Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $150, the probability of a fire is 0.1%, and in the event of a fire, the insured damages (the payout on the policy) will be $140,000. Required: a. Make a table of the two possible payouts on each policy with the probability of each. (Negative answers should be indicated with a minus sign.) b. Suppose you own the entire firm, and the company issues only one policy. What are the expected value, variance, and standard deviation of your profit? (Do not round intermediate calculations. Round your standard deviation to the nearest whole number.) c. Now suppose your company issues two policies. The risk of fire is independent across the two policies. Make a table of the three possible payouts along with their associated probabilities. (Negative answers should be indicated with a minus sign. Round your "Probability" answers to 4 decimal places.) d. What are the expected value, variance, and…Calculate the life insurance gross premium for an insurance company, XYZ Life, under the following assumptions. Please round your answer to the nearest dollar. 1-year term insurance for a 35-year-old female • The death benefit is $10,00O • The probability of death within one year given a female is 35 years old (q30) is 0.015 The interest rate is 1.5% • All deaths occur uniformly, hence for simplicity, price the product assuming all deaths happen at the middle of the year • XYZ Life is looking for a 25% loading based on the pure premium (i.e. PV of expected loss) (Hint: When loading Ap, expressed as a percentage, is based on pure premium, Gross premium = Pure premium × [1 + Ap]) Choose the correct answer from below. $166 $171 $149 $155 O $186A company is considering two insurance plans with the following types of coverage and premiums: Fire/Theft Liability Plan A Plan B $20,000 $35,000 $198,000 $126,000 Monthly Premium $75 $57 Premiums are sold in units. For example, one can buy one unit of plan A insurance for $75 per month and receive $20,000 in Fire/Theft insurance. Two units of plan A insurance cost $150 per month and give $40,000 in Fire/Theft insurance. The company wants at least $680,000 in coverage for Fire/Theft insurance and $4,086,000 in coverage for liability insurance. How many units of each plan should be purchased to meet the needs of the company while minimizing cost? The company should purchase units of plan A and What is the minimum monthly premium for the company? $ units of plan B.
- A company is considering two insurance plans with the following types of coverage and premiums: Plan A Plan B Fire/Theft $26,000 $33,000 Liability Monthly Premium $80 $177,000 $139,000 $72 Premiums are sold in units. For example, one can buy one unit of plan A insurance for $80 per month and receive $26,000 in Fire/Theft insurance. Two units of plan A insurance cost $160 per month and give $52,000 in Fire/Theft insurance. The company wants at least $774,000 in coverage for Fire/Theft insurance and $4,070,000 in coverage for liability insurance. How many units of each plan should be purchased to meet the needs of the company while minimizing cost? The company should purchase units of plan A and What is the minimum monthly premium for the company? $ units of plan B.(Solving for i) An insurance agent just offered you a new insurance product that will provide you with $963.60 12 years from now if you invest $200 today. What annual rate of interest would you earn if you invested in this product? The annual rate of interest you would earn if you invested in this product is %. (Round to the nearest whole percent.)An engineer is considering buying a life insurance policy for his family. He currently owes $65,000 and he would like his family to have an annual available income of $50,000 indefinitely. If the engineer assumes that any money from the insurance policy can be invested in an account paying a guaranteed 5% annual interest, how much life insurance should he buy? $1,000,000 $1,065,000 ● $2,000,000 $2,130,000
- The Real Deal Life Insurance company is offering to you to purchase a policy that will pay you, your children, your grandchildren, and all your heirs $ 37, 000 every year forever. The required return on this policy is 6.3 percent. What is the maximum amount of money that you should be willing to pay for this policy? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)Erie General Hospital wants to purchase a new blood analyzing device today. Its local bank is willing to lend it the money to buy the device at a 2% monthly rate. The loan payments will start at the end of the month and will be $3,100 per month for the next 24 months. The purchase price of the device is___________.A typical London cyclist might expect to earn £40k a year. This is reduced to £20k forone year following a serious injury. The annual probability of a serious injury is 35%. (a) What is the expected annual income of a cyclist in London? (b) A group of risk-adverse London cyclists agree to form a charity providinginsurance. Those paying a fixed annual premium will receive £20,000 in theevent of an accident. What is the “fair” (zero-profit) premium for thisinsurance policy? Show your work. (c) Research has found that wearing a yellow head-protector can reduce theannual risk of injury to zero. Show in a large clearly labelled graph themaximum price that a risk-adverse cyclist would pay for a head-protector.Note: the answer given does not need to be precise but must be consistent withyour graph.