Premiums Investment Income Claims Expenses Solvency Reserve Benefit Reserve DAC Required Capital Year 1 120 0 55 75 100 50 70 5 Year 2 110 10 55 5 125 60 40 10 Year 3 100 20 100 5 0 0 0 0
Premiums Investment Income Claims Expenses Solvency Reserve Benefit Reserve DAC Required Capital Year 1 120 0 55 75 100 50 70 5 Year 2 110 10 55 5 125 60 40 10 Year 3 100 20 100 5 0 0 0 0
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
Topic Video
Question
Transcribed Image Text:Year 1
Year 2
Year 3
Premiums
120
110
100
Investment Income
0
10
20
Claims
55
55
100
Expenses
75
5
5
Solvency Reserve
100
125
0
Benefit Reserve
50
60
0
DAC
70
40
0
Required Capital
5
10
0
Assume reserves, DAC, and required capital are EOY amounts
No taxes
Required capital investment income rate = 0%
Calculate the ROE (as percentage) at the end of year 1.
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