Justify purchasing the? insurance

Assignment Help Finance Basics
Reference no: EM132185266

Genentech's main facility is located in South San Francisco. Suppose that Genentech would experience a direct loss of$450 million in the event of a major earthquake disrupting its operations. The chance of such an earthquake is 2.5% per? year, with a beta of -0.30.

a. If the? risk-free interest rate is 4.5%?, and the expected return of the market is 10.5%?, what is the actuarially fair insurance premium to cover? Genentech's loss?

b. Suppose the insurance company raises the premium by an additional 15% over the amount calculated in part ?(a?) to cover its administrative and overhead costs. What amount of financial distress or issuance costs would Genentech have to suffer if it were not insured to justify purchasing the? insurance?

Reference no: EM132185266

Bank certificate of deposit

A mother wants to invest $8000.00 for her son's future education. She invests a portion of the money in a bank certificate of deposit (CD account) which earns 4% and the rem

Firm market value capital structure

What is the firm's market value capital structure? If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate shou

What is the sk/sf cross rate

Bartman Corporation observes that the Swiss franc (SF) is being quoted at $0.6164/SF, while the Swedish krona (SK) is quoted at $0.1981/SK. What is the SK/SF cross rate?

What should the offer price be

J&J Foods wants to issue some 7 percent preferred stock that has a stated liquidating value of $100 a share. The company has determined that stocks with similar characterist

What is the npv of her college education

Either way, she plans to work until the day she turns 63 (she begins college right away). The interest/discount rate is 8%. What is the NPV of her college education? (Note:

Would you be likely to earn above average returns

If the gains are priced in and you bought stocks on the basis of the information contained in this article, would you be likely to earn above-average returns on your investm

Computation of company stock capm

A particular stock has an expected return of 11%. If the expected risk premium on the market portfolio is 8%, and the risk-free rate is 5%, what is the stock's CAPM beta?

The time-weighted compounded

You purchase a stock for $100 that pays an annual dividend of $5.50. At the beginning of the second year, you purchase an additional share for $130. At the end of the second y


Write a Review

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd