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Carolyn is senior vice president of finance and chief actuary for Rock Solid Insurance Company (RSIC). Lonnie is double-majoring in finance and mathematics at State University. Lonnie applied for an internship with Rock Solid, and he is working for the company during the summer before the start of his senior year of college. Curious to learn what Lonnie knew about insurance company financial statements and ratemaking, Carolyn prepared a quiz for Lonnie to take on his first day on the job. See if you can help Lonnie answer these questions.
2. Explain how it is possible for Rock Solid to have $500 million in written premiums last year and $505 million in earned premiums last year.
3. Rock Solid's net underwriting result last year was a $540,000 loss. Explain how it is possible that Rock Solid was required to pay income taxes.
4. Rock Solid provides collision coverage for one year on 50,000 autos located in a specific territory within the state. During the one-year period, the company expects to pay $10 million in incurred losses and loss-adjustment expenses for these 50,000 autos. Based on this information, what is the pure premium?
One year ago, the Chinese e-commerce company Alibaba Group floated its shares in the biggest Initial Public Offering in US history. Alibaba Group priced its shares at $68 raising $21.8 bn and valuing the company at $167.6 bn. What is the payout ratio..
Which of the following is a chief advantage of factoring of recievables?
Smith Technologies is expected to generate $175 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Smith has no debt or preferred stock, and its WACC is 12%. If smith has 65 million shares..
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You are expecting to receive $300 at the end of each year in years 3, 4, and 5, and then 500 each year at the end of each year in years 10 through 25, inclusive. If the appropriate discount rate is 6.5 percent, for how much would you be able to sell ..
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You own a 5-year bond with a face value of $1,000 and a coupon rate of 10 percent with annual payments. The bond is currently worth $1,216.47. If market interest rates remain unchanged, what will be the value of the bond when there are only 3 years l..
What is the maximum amount of insurance that Delta can write on a single building under the reinsurance agreement? Explain your answer.
Page Enterprises has bonds on the market making annual payments, with eleven years to maturity, and selling for $982. At this price, the bonds yield 7.60 percent. What must the coupon rate be on the bonds?
What is the proportion of debt financing for a firm that expects a 24% return on equity, a 16% return on assets, and a 12% return on debt? Ignore taxes. A firm has perpetual debt of $10 million at an interest rate of 7%. What is the present value of ..
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