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

Do you expect price of shares in one year to be much higher

Do you expect the price of the shares in one year to be much higher? Or lower? Or only a little bit higher? How risky the stock is. Is its price prone to wild swings up and do

Australian commonwealth government

The Henry Tax Review was released by the Australian Commonwealth Government on May 2, 2010. What is the current company tax rate in Australia and how will the Government cha

What conflicts arise between shareholders and managers

Is the role of the Federal Reserve still relevant? What conflicts arise between shareholders and managers? Sarbanes Oxley: Is it working? Efficient Market Hypothesis: is it t

Distinguish between regulatory capital and balance sheet

Identify whether the Basel Accord is based on regulatory capital or balance sheet capital and illustrate how this has changed over time -  Distinguish between regulatory capi

Calculate the variance

You've observed the following returns on Yasmin Corporation's stock over the past five years: 5 percent, -8 percent, 28 percent, 17 percent and 13 percent. Calculate the var

Advantages of international diversification

Determine why, given the advantages of international diversification, some firms choose not to expand internationally. Provide specific examples to support your response.

Expected return on this stock

A stock has a beta of 1.05, the expected return on the market is 12 percent, and the risk-free rate is 4 percent. What must the expected return on this stock be? (Show your

What is the value of an fra that enables the holder to earn

Q1) The 12-month, 15-month, 18-month zero rates are 7.4%, 7.5%, 7.6% with continuous compounding. What is the value of an FRA that enables the holder to earn 8.6% (with semian


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