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Delta Insurance is a property insurer that entered into a surplus-share reinsurance treaty with Ever safe Re. Delta has a retention limit of $200,000 on any single building, and up to nine lines of insurance may be ceded to Ever safe Re. A building valued at $1,600,000 is insured with Delta. Shortly after the policy was issued, a severe windstorm caused a $800,000 loss to the building.
a. How much of the loss will Delta pay?
b. How much of the loss will Ever safe Re pay?
c. What is the maximum amount of insurance that Delta can write on a single building under the reinsurance agreement? Explain your answer.
The Auto Company just paid a dividend of $3.00 and analysts expect the dividend to grow at its compound average growth rate of 10.72% forever. You plan to purchase the stock then hold it for 10 years. Your expected rate of return is 12%, and the next..
Given the Federal Reserve Board’s current and forward-looking position on interest rates, predict the level of risk associated with investing in bonds and recommend a portfolio percentage for investment in bonds for a financial institution.
The risk premium of a security is determined by its __________ risk and does not depend on its __________risk.
INFLATION Due to a recession, expected inflation this year is only 3.25%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3.25%. Assume that the expectations theory holds and the real risk-free rate..
Given the following: US Dollars Swiss Francs Firm LMN 10 pct. 7 pct. Firm XYZ 8 pct. 6 pct. The above borrowing rates represent the borrowing rates the firms can obtain for a five year fixed rate debt issue in U.S. dollars or Swiss francs. Suppose XY..
Fly Away, Inc., has balance sheet equity of $6.8 million. At the same time, the income statement shows net income of $836,400. The company paid dividends of $414,018 and has 200,000 shares of stock outstanding. If the benchmark PE ratio is 32, what i..
Jiminy's Cricket Farm issued a 30-year, 7 percent semi-annual bond 9 years ago. The bond currently sells for 89 percent of its face value. The book value of the debt issue is $16 million. The company's tax rate is 31 percent. What is the company's to..
Aspin Corporation's charter authorizes issuance of 2,000,000 shares of common stock. Currently 1,400,000 shares are outstanding and 100,000 shares are being held as treasury stock. The firm wishes to raise $48,000,000 for a plant expansion. What is t..
When you retire at 65 years old, you have $1 million in your saving account which earns 7% interest annually. You want to be able to increase your withdrawals by 3% each year to keep up with inflation. How much can you withdraw the first year if you ..
You purchase a $325,000 Town home and you pay 25% down. You obtain a 30 year fixed-rate mortgage with an annual interest rate of 5.75%. After 5 years you refinance the mortgage for 25 years at a 5.1% annual interest rate. A.T. bond with a $1000 par i..
A medical group practice is considering offering a new service with risk that is greater than the current risk of the business. In evaluating this investment, the decision maker should
Operating Cash Flow In comparing accounting net income and operating cash flow, name two items you typically find in Net Income that are not in Operating Cash Flow. Explain why each is excluded from Operating Cash Flow.
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