Suppose that the spot price of gold is $600. The total cost of insurance and storage for gold is $30 per year, payable in advance. The rate of interest for borrowing or lending is 20%. If the forward price is $700, and you are interested in arbitrage, you would: (Hint: Check answer with an arbitrage table)
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Sell the spot commodity, lend money, and buy a forward contract |
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Borrow money, buy the spot commodity, and buy a forward contract |
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Borrow money, buy the spot commodity, and sell a forward contract |
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Sell a forward contract, lend money, and buy the spot commodity |
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Sell a forward, lend money, and sell the spot commodity |
In: Finance
Suppose that the spot price of gold is $500. The total cost of insurance and storage for gold is $30 per year, payable in advance. The rate of interest for borrowing or lending is 20%. If the forward price is $650, how much money could you make from arbitrage at expiration of the forward? Hint: Use an arbitrage table after you figure out the appropriate arbitrage portfolio.
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12 |
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14 |
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16 |
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18 |
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20 |
In: Finance
A firm has an investment project that will cost the firm $30 million but will generate $2 million of NPV. Also there is a 5% chance that the firm will lose a lawsuit to employees, and be forced to pay damage of $30 million. Suppose that a liability insurance policy with a $30 million limit has a premium equal to $1.5 million.
Compute expected claim cost
Compute the amount of loading on the policy
Compute the expected cost of not pursuing this project
Should the firm purchase this insurance or not? Why or why not?
There is a portfolio whose current value is $2 million. Its daily return is normally distributed with a mean of 2% and a standard deviation of 0.7.
Compute the daily 99% and 95% VaRs of a portfolio
Interpret the results
A firm has an investment project that will cost the firm $30 million but will generate $2 million of NPV. Also there is a 5% chance that the firm will lose a lawsuit to employees, and be forced to pay damage of $30 million. Suppose that a liability insurance policy with a $30 million limit has a premium equal to $1.5 million.
Compute expected claim cost
Compute the amount of loading on the policy
Compute the expected cost of not pursuing this project
Should the firm purchase this insurance or not? Why or why not?
There is a portfolio whose current value is $2 million. Its daily return is normally distributed with a mean of 2% and a standard deviation of 0.7.
Compute the daily 99% and 95% VaRs of a portfolio
Interpret the results
In: Finance
Which of the following is not a fixed cost?
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Depreciation on factory equipment |
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Property taxes on factory building |
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Property insurance on factory building |
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Payroll taxes on factory employees |
In: Accounting
An example of a cost likely to have a fixed behavior pattern is: a) sales commission. b) production labor wages. c) insurance expense. d) shipping cost for packaging equipment.
In: Accounting
A local insurance company is analyzing the cost of the two body shops their customers tend to use in hopes to save money. They randomly select 10 bills from their files of claim payments made in the last year to see if one company tends to be cheaper than the other. The data are shown below.
Crash-tastic: 800 1100 1500 1800 1900 1420 2100 2300 1400 1500
Mr. Fix It: 1700 1230 1220 1600 1120 1560 920 1800 1500 1400
Part 1 of 2: 5 pts Name the appropriate test we would use to determine if there is a significant difference in repair costs (2 pts). BE SPECIFIC! Explain why you made the choice you did (3 pts)!
Part 2 of 2: 5 pts Check each of the four appropriate conditions in detail (1 pt each) and indicate whether you can proceed with the test. If you cannot proceed, explain why, sighting the condition that wasn't met and why.
In: Statistics and Probability
Which of the following is a fixed cost in operating a dental clinic?
Materials needed for procedures
Health insurance coverage of each patient
Advertising in the local newspaper
Cost of dental checkup per patient
In: Operations Management
Which of the following is a controllable cost for a plant supervisor?
a.salaries of production supervisors
b.None of these choices are correct.
c.the use of direct materials
d.the cost of insurance related to property, plant, and equipment
In: Accounting
Which of the following accounts would not appear on a schedule of cost of goods manufactured?
Multiple Choice
Depreciation on factory equipment.
Raw materials inventory.
Wages payable.
Indirect labor.
Factory insurance expired.
In: Accounting
Jake’s Garage owns a building with the replacement cost value of $400,000 at the time of a covered loss. If Jake’s Garage has the $300,000 limit of insurance on its building with 80% Coinsurance, RC, and $1,000 deductible, what is the amount Jake’s Garage paid by its insurer.
In: Operations Management