Pick a pure risk (except fire). Discuss how close to an ideally insurable risk is your choice. Make sure you mention each of the requirements for an ideally insurable risk.  

2. Discuss how adverse selection could impact the insurability of that risk.

3. Add a section on how insuring that risk is not gambling.

4. Conclude your paper.

You will be graded on your use of the vocabulary in this course and your content. So, use words found in your text in the paper for the strongest grade. Place the paper in this Dropbox

Bok Corp.'s ROE last year was only 5%, but its management has developed a new operating plan that calls for a debt-to-capital ratio of 40%, which will result in annual interest charges of $561,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $1,258,000 on sales of $17,000,000, and it expects to have a total assets turnover ratio of 2.1. Under these conditions, the tax rate will be 35%. If the changes are made, what will be the company’s return on equity?

Many people believe the bond ratings agencies played a role in the financial meltdown and mortgage crisis that began around 2008. What do you think were some of the issues people had with the bond rating agencies and were those issues reasonable?

Will Jones, LLP is a small CPA firm that focuses primarily on preparing tax returns for small businesses. The company pays a $500 annual fee plus $10 per tax return for a license to use Mega Tax software.

(a) What is the company’s total annual cost for the Mega Tax software if 300 returns are filed? If 400 returns are filed? If 500 returns are filed?

Total cost for 300 returns:

Total cost for 400 returns:

Total cost for 500 returns:

(b) What is the company’s cost per return for the Mega Tax software if 300 returns are filed? If 400 returns are filed? If 500 returns are filed? (Round answers to 2 decimal places, e.g. 52.75.)

Cost per unit (300):

Cost per unit (400):

Cost per unit (500):

​Beryl's Iced Tea currently rents a bottling machine for $ 53,000 per​ year, including all maintenance expenses. It is considering purchasing a machine instead and is comparing two​ options: a. Purchase the machine it is currently renting for $ 165,000. This machine will require $ 23,000 per year in ongoing maintenance expenses. b. Purchase a​ new, more advanced machine for $ 260,000. This machine will require $ 17,000 per year in ongoing maintenance expenses and will lower bottling costs by $ 13,000 per year.​ Also, $ 35,000 will be spent up front to train the new operators of the machine. Suppose the appropriate discount rate is 8 % per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each​ year, as is the cost of the rental machine. Assume also that the machines will be depreciated via the​ straight-line method over seven years and that they have a​ 10-year life with a negligible salvage value. The marginal corporate tax rate is 40 %. Should​ Beryl's Iced Tea continue to​ rent, purchase its current​ machine, or purchase the advanced​ machine? To make this​ decision, calculate the NPV of the FCF associated with each alternative.

Rate of​ return, standard​ deviation, coefficient of variation  Personal Finance Problem   Mike is searching for a stock to include in his current stock portfolio. He is interested in​ Hi-Tech Inc.; he has been impressed with the​ company's computer products and believes​ Hi-Tech is an innovative market player. ​ However, Mike realizes that any time you consider a technology​ stock, risk is a major concern. The rule he follows is to include only securities with a coefficient of variation of returns below

1.12.

Mike has obtained the following price information for the period

2015

through

2018​:

LOADING...

. ​ Hi-Tech stock, being​ growth-oriented, did not pay any dividends during these 4 years.a.  Calculate the rate of return for each​ year,

2015

through

2018​,

for​ Hi-Tech stock.

b.  Assume that each​ year's return is equally probable and calculate the average return over this time period.

c.  Calculate the standard deviation of returns over the past 4 years.  

​(Hint​:

Treat this data as a​ sample.)

d.  Based on b and c determine the coefficient of variation of returns for the security.

e.  Given the calculation in d what should be​ Mike's decision regarding the inclusion of​ Hi-Tech stock in his​ portfolio?

a.  The rate of return for year

2015

is

nothing​%.

​(Round to two decimal​ places.)

STOCK PRICE

YEAR BEGINNING END

2015   $14.94   $20.99
2016   $20.99   $63.49
2017   $63.49   $71.47
2018   $71.47   $91.95

Can an action result in both a crime and a tort? Why?

Suppose that a stock price is $10.00 per share at current time and at the end of three months the stock price may either move up to $11.00 per share or down to $9.00 per share. Consider a European call option which allows you to buy the stocks at $10.50 per share at the end of three months. The risk free rate is 12% per year.

Find the fair price for the option.