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a. Insurer X insures a large number of small property accounts with average premiums of $1,000. The policies range from a low of $600 to a high of $1,400 premium. Insurer X wants to grow but is inhibited by statutory surplus requirements. As the re-insurer, what kind of treaty reinsurance program would you recommend for insurer X and why.
b. Insurer Y has decided to expand its personal lines auto and home insurance program from the Middle West to the southern states, including the gulf coast states. Insurer Y has good experience with wind claims because of toreadors in the Middle West. While it expects similar tornado losses in many of the southern states, it is more concerned with hurricanes. As Insurer Y’s re-insurer what kind of treaty reinsurance program would you recommend for auto and home insurance and why.
Haunted Forest, Inc. is selling fog machines. Use the following information about Haunted Forest, Inc. to answer the following questions. Average selling price per unit $329. Variable cost per unit $203 Units sold 364 Fixed costs $16,717 Interest exp..
ABC Corp. has an ROE of 4% and reinvests 30% of its net income. ABC has just paid an annual dividend of $0.26. ABC stock has a beta of 1.1. The risk-free rate is 1.2% and the expected return on the market portfolio is 8%. What is the appropriate disc..
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In the lease versus buy decision leasing often preferable
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Assume that the 1-year interest rate in the US is 2% and the 1-year interest rate in Sweden is 4%. You have no additional information on the spot or the forward rate. What is likely to happen to the USD / SKR spot rate and why? What is likely to happ..
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Your firm has an average collection period of 39 days. Current practice is to factor all receivables immediately at a 2.00 percent discount. What is the effective cost of borrowing in this case?
Suppose you just bought a 20-year annuity of $7,500 per year at the current interest rate of 10 percent per year. What is the value of your annuity today? What happens to the value of your investment if interest rates suddenly drop to 5 percent? What..
Explain why NPV is preferred over IRR if there is a conflict between the two methods in the selection of projects
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