Expected Loss = [Minimum Expected Loss * (1 - Probability of disasters)] + [Maximum Expected Loss * Probability of disasters]
= [$0 * (1 - 0.01)] + [$420 million * 0.01]
= $0 + $4.20 million = $4.20 million, or $4,200,000
Suppose your company has a building worth $420 million. Because it is located in a high-risk...
Suppose your company has a building worth $165 million. Because it is located in a high-risk area for natural disasters, the probability of a total loss in any particular year is 1.15 percent. What is your company’s expected loss per year on this building? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Input the amount as positive value.)
er 23 for Credit Question 3 (of 3) value: 33.34 points In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $420 million. The probability of loss is 1.41 percent in one year, and the relevant discount rate is 3.5 percent....
Suppose your company needs to raise $30 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 7.5 percent, and you're evaluating two issue alternatives: a 7.5 percent semiannual coupon bond and a zero coupon bond. Your company's tax rate is 35 percent Requirement 1: (a) How many of the coupon bonds would you need to issue to raise the $30 million? (Do not round intermediate calculations. Enter the...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $630 million. The probability of loss is 1.43 percent in one year, and the relevant discount rate is 4.6 percent. a. What is the actuarially fair insurance premium? (Enter your...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $390 million. The probability of loss is 1.29 percent in one year, and the relevant discount rate is 3.1 percent. a. What is the actuarially fair insurance premium? (Do not round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $250 million. The probability of loss is 1.32 percent in one year, and the relevant discount rate is 3.2 percent. a. What is the actuarially fair insurance premium? (Do not round...
Suppose your company needs to raise $54 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 4.8 percent, and you're evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 4.8 percent and a zero coupon bond. Your company's tax rate is 25 percent. Both bonds will have a par value of $1,000. a-1. How many of the coupon bonds would you need to issue...
Suppose your company needs to raise $35.5 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent, and you’re evaluating two issue alternatives: a 8.0 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 35 percent. Requirement 1: (a) How many of the coupon bonds would you need to issue to raise the $35.5 million? (Do not round intermediate calculations. Enter the...
Suppose your company needs to raise $53 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 4.6 percent, and you're evaluating two Issue alternatives. A semiannual coupon bond with a coupon rate of 4.6 percent and a zero coupon bond. Your company's tax rate is 24 percent. Both bonds will have a par value of $2,000. a-1. How many of the coupon bonds would you need to issue...
In 2015, a baseball player signed a contract reported to be worth $104.3 million. The contract was to be paid as $15.7 million in 2015, $15.7 million in 2016, $18.1 million in 2017, $18.2 million in 2018, $18.2 million in 2019, and $18.4 million in 2020. If the appropriate interest rate is 11 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year. (Enter your answer in dollars, not millions...