Insurance

In a specific wager, Pat is paid $5.00 if the price of ABC Corp. is above $85.00. Currently, ABC ...

In a specific wager, Pat is paid $5.00 if the price of ABC Corp. is above $85.00. Currently, ABC ...

In a specific wager, Pat is paid $5.00 if the price of ABC Corp. is above $85.00. Currently, ABC Corp. price is $75.00, σ = 0.25, r = 0.04, div = 0 and the wager lasts 6 months. Pat receives nothing if the price is below $85.00. What is the value of

elf_fu   666   9 Replies

Samir Jay Kerkar

The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 78.81, ...

The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 78.81, ...

The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 78.81, respectively. What is the continuously compounded 3-year zero yield?
A) 5.35%
B) 5.85%
C) 6.12%
D) 6.40%

elf_fu   462   4 Replies

Dolly Hao

Refer to the table 6.1. Given a lease rate of 7.0% on the 24-month corn forward contract, what is ...

Refer to the table 6.1. Given a lease rate of 7.0% on the 24-month corn forward contract, what is ...

Refer to the table 6.1. Given a lease rate of 7.0% on the 24-month corn forward contract, what is the approximate potential arbitrage profit per contract?
A) 3.68 cents
B) 4.48 cents
C) 5.84 cents
D) 6.90 cents

elf_fu   278   2 Replies

Data Baslandze

The employees of an industrial heating and cooling company spent four days installing a large gas ...

The employees of an industrial heating and cooling company spent four days installing a large gas ...

The employees of an industrial heating and cooling company spent four days installing a large gas furnace in a newly-constructed building. While testing the furnace one week later, an explosion occurred, damaging the building. Damage to the building

JamesLu   205   3 Replies

Danh Nguyen

Consider a two-period binomial model, where each period is 6 months. Assume the stock price is ...

Consider a two-period binomial model, where each period is 6 months. Assume the stock price is ...

Consider a two-period binomial model, where each period is 6 months. Assume the stock price is $46.00, σ = 0.28, r = 0.06 and the dividend yield is 2.0%. What is the maximum approximate strike price where early exercise would occur with an American c

elf_fu   680   4 Replies

Shujie Jin

The fundamental purpose of a variable annuity is to

The fundamental purpose of a variable annuity is to

The fundamental purpose of a variable annuity is to
A) provide funding flexibility to the purchaser.
B) provide a hedge against inflation.
C) fund the purchase of cash value life insurance.
D) guarantee a fixed-dollar benefit t

JamesLu   178   3 Replies

syrgak

The spot price of corn is $5.85 per bushel. The opportunity cost of capital for an investor is 0.5% ...

The spot price of corn is $5.85 per bushel. The opportunity cost of capital for an investor is 0.5% ...

The spot price of corn is $5.85 per bushel. The opportunity cost of capital for an investor is 0.5% per month. If storage costs of $0.04 per bushel per month are factored in, all else being equal, what is the likely price of a 4-month forward contrac

elf_fu   362   5 Replies

bro0005

IBM and AT&T decide to swap $1 million loans. IBM currently pays 9.0% fixed and AT&T pays ...

IBM and AT&T decide to swap $1 million loans. IBM currently pays 9.0% fixed and AT&T pays ...

IBM and AT&T decide to swap $1 million loans. IBM currently pays 9.0% fixed and AT&T pays 8.5% on a LIBOR + 0.5% loan. What is the net cash flow for IBM if they swap their fixed loan for a LIBOR + 0.5% loan and LIBOR rises to 8.5%?
A) -$

elf_fu   216   2 Replies

Ishita Kapoor

Corn call options with a $1.75 strike price are trading for a $0.14 premium. Farmer Jayne decides to ...

Corn call options with a $1.75 strike price are trading for a $0.14 premium. Farmer Jayne decides to ...

Corn call options with a $1.75 strike price are trading for a $0.14 premium. Farmer Jayne decides to hedge her 20,000 bushels of corn by selling short call options. Six-month interest rates are 4.0% and she plans to close her position in 6 months. Wh

elf_fu   497   5 Replies

林復佰

Assume that you open a 100-share short position in Jiffy, Inc. common stock at the bid-ask prices of ...

Assume that you open a 100-share short position in Jiffy, Inc. common stock at the bid-ask prices of ...

Assume that you open a 100-share short position in Jiffy, Inc. common stock at the bid-ask prices of $32.00 - $32.50. When you close your position, the bid-ask prices are $32.50 - $33.00. You pay a commission rate of 0.5%. The market interest rate is

elf_fu   423   4 Replies

綺羅生

The price of a 3-year zero coupon government bond is 85.16. The price of a similar 4-year bond is ...

The price of a 3-year zero coupon government bond is 85.16. The price of a similar 4-year bond is ...

The price of a 3-year zero coupon government bond is 85.16. The price of a similar 4-year bond is 79.81. What is the yield to maturity (effective annual yield) on the 4-year bond?
A) 4.6%
B) 5.5%
C) 5.8%
D) 6.7%

elf_fu   573   5 Replies

D Zhang

All of the following are examples of loss financing, except:

All of the following are examples of loss financing, except:

All of the following are examples of loss financing, except:
A) raising capital through selling stocks and bonds on the capital market
B) insurance
C) hedging
D) risk retention

medulla   237   3 Replies

Asim Karimali

Corn call options with a $1.70 strike price are trading for a $0.15 premium. Farmer Jayne decides to ...

Corn call options with a $1.70 strike price are trading for a $0.15 premium. Farmer Jayne decides to ...

Corn call options with a $1.70 strike price are trading for a $0.15 premium. Farmer Jayne decides to hedge her 20,000 bushels of corn by selling short call options. Six-month interest rates are 4.0% and she plans to close her position and sell her co

elf_fu   927   7 Replies

Data Baslandze

The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 78.81, ...

The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 78.81, ...

The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 78.81, respectively. What is the par coupon on a 4-year coupon bond selling at par?
A) 5.02%
B) 5.43%
C) 5.81%
D) 6.06%

elf_fu   217   2 Replies

bhwergqhnwdjsfv

The annual coupon rate on a 1-year treasury bond is 5.5%. The coupon on a 2-year treasury bond is ...

The annual coupon rate on a 1-year treasury bond is 5.5%. The coupon on a 2-year treasury bond is ...

The annual coupon rate on a 1-year treasury bond is 5.5%. The coupon on a 2-year treasury bond is 5.8%. What is the implied YTM on a hypothetical 2-year zero coupon treasury bond?
A) 5.45%
B) 5.50%
C) 5.75%
D) 5.81%

elf_fu   315   3 Replies

Shaan Minhas

Interest rates on the U.S. dollar are 6.5% and euro rates are 5.5%. The dollar per euro spot rate is ...

Interest rates on the U.S. dollar are 6.5% and euro rates are 5.5%. The dollar per euro spot rate is ...

Interest rates on the U.S. dollar are 6.5% and euro rates are 5.5%. The dollar per euro spot rate is 0.950. What is the arbitrage profit on a required 1 million euro payment if the forward rate is 0.980 dollars per euro and the exchange occurs in one

elf_fu   427   3 Replies

Xiang Hua

A stock is selling for $32.70. The strike price on a call, maturing in 6 months, is $35. The ...

A stock is selling for $32.70. The strike price on a call, maturing in 6 months, is $35. The ...

A stock is selling for $32.70. The strike price on a call, maturing in 6 months, is $35. The possible stock prices at the end of 6 months are $39.50 and $28.40. If interest rates are 6.0%, what is the option price?
A) $1.90
B) $2.80
C)

elf_fu   221   4 Replies

Joycelyn Xia

A stock is valued at $28.00. The annual expected return is 9.0% and the standard deviation of ...

A stock is valued at $28.00. The annual expected return is 9.0% and the standard deviation of ...

A stock is valued at $28.00. The annual expected return is 9.0% and the standard deviation of annualized returns is 19.0%. If the stock is lognormally distributed, what is the price of the stock given a one standard deviation move up after 4 years?

elf_fu   418   3 Replies

Charlie Hou

A stock is valued at $55.00. The annual expected return is 12.0% and the standard deviation of ...

A stock is valued at $55.00. The annual expected return is 12.0% and the standard deviation of ...

A stock is valued at $55.00. The annual expected return is 12.0% and the standard deviation of annualized returns is 22.0%. If the stock is lognormally distributed, what is the expected median stock price after 3 years?
A) $57.67
B) $67.67

elf_fu   385   3 Replies

Heidi Forthofer

Exculpatory clauses are clauses in business contracts that transfer risk between contracting ...

Exculpatory clauses are clauses in business contracts that transfer risk between contracting ...

Exculpatory clauses are clauses in business contracts that transfer risk between contracting parties.
T/F?

medulla   271   2 Replies

Joe Gittleson

KidCo bought forward contracts on 20,000 bushels of corn at $1.65 per bushel. Corporate tax rates ...

KidCo bought forward contracts on 20,000 bushels of corn at $1.65 per bushel. Corporate tax rates ...

KidCo bought forward contracts on 20,000 bushels of corn at $1.65 per bushel. Corporate tax rates are 35.00%. Revenue is $100,000 and other costs are $60,000. Spot prices on corn are $1.75 per bushel. Calculate the after-tax net income.
A) $7,00

elf_fu   751   5 Replies

Vincent Vu

Farmer Jayne decides to hedge 10,000 bushels of corn by purchasing put options with a strike price ...

Farmer Jayne decides to hedge 10,000 bushels of corn by purchasing put options with a strike price ...

Farmer Jayne decides to hedge 10,000 bushels of corn by purchasing put options with a strike price of $1.80. Six-month interest rates are 4.0% and the total premium on all puts is $1,200. If her total costs are $1.65 per bushel, what is her marginal

elf_fu   407   2 Replies

Harris Dupre

Farmer Jayne bought a $1.70 strike put option for $0.11 and sold a $1.75 strike call option for a ...

Farmer Jayne bought a $1.70 strike put option for $0.11 and sold a $1.75 strike call option for a ...

Farmer Jayne bought a $1.70 strike put option for $0.11 and sold a $1.75 strike call option for a premium of $0.14. Her total costs are $1.65 per bushel and interest rates are 4.0% over this period. What is the floor in her strategy assuming a 20,000

elf_fu   629   3 Replies

Hanna Krista Norris

A put option is purchased and held for 1 year. The Exercise price on the underlying asset is $40. If ...

A put option is purchased and held for 1 year. The Exercise price on the underlying asset is $40. If ...

A put option is purchased and held for 1 year. The Exercise price on the underlying asset is $40. If the current price of the asset is $36.45 and the future value of the original option premium is (-$1.62), what is the put profit, if any, at the end

elf_fu   347   2 Replies

Zongxuan Li

Jim S. buys a $50,000 car. Rather than buying insurance on the car, he sets aside $30,000 in a ...

Jim S. buys a $50,000 car. Rather than buying insurance on the car, he sets aside $30,000 in a ...

Jim S. buys a $50,000 car. Rather than buying insurance on the car, he sets aside $30,000 in a savings account to cover possible losses due to an accident. He is:
A) self-insuring
B) a moral hazard
C) assuming risk
D) decreasing h

medulla   258   3 Replies

Alice Wong

Discount Department Stores is a national retail chain. The company had one large, central warehouse. ...

Discount Department Stores is a national retail chain. The company had one large, central warehouse. ...

Discount Department Stores is a national retail chain. The company had one large, central warehouse. At the suggestion of the risk manager, the company decided to build four smaller regional warehouses so that a loss at the central warehouse would no

chouri   381   4 Replies

sindhura9

A farmer expects to harvest 800,000 bushels of corn. To eliminate price risk, the farmer elects to ...

A farmer expects to harvest 800,000 bushels of corn. To eliminate price risk, the farmer elects to ...

A farmer expects to harvest 800,000 bushels of corn. To eliminate price risk, the farmer elects to short corn futures. What would cause the farmer to short only 720,000 bushels of corn?
A) Basis risk
B) Illiquid futures markets
C) Marg

elf_fu   532   2 Replies

Luqmanul Haqim

An investor enters into a 2-year swap agreement to purchase crude oil at $105.65 per barrel. Soon ...

An investor enters into a 2-year swap agreement to purchase crude oil at $105.65 per barrel. Soon ...

An investor enters into a 2-year swap agreement to purchase crude oil at $105.65 per barrel. Soon after the swap is created forward prices rise and the new swap price on a similar swap is $108.32. If interest rates are 3.0% per year, what is the gain

elf_fu   274   3 Replies

Kevin Wan

Assume S = $55, K = $55, r = 0.07, σ = 0.27, div = 0.0, and 180 days until expiration. What is the ...

Assume S = $55, K = $55, r = 0.07, σ = 0.27, div = 0.0, and 180 days until expiration. What is the ...

Assume S = $55, K = $55, r = 0.07, σ = 0.27, div = 0.0, and 180 days until expiration. What is the premium on an Asian average price call, where N = 5?
A) $2.89
B) $2.99
C) $3.09
D) $3.19

elf_fu   582   11 Replies

Manesh Bansal

The underlying stock for a European exchange option has S = $27.15, div = 2.0%, and σ = 0.18. The ...

The underlying stock for a European exchange option has S = $27.15, div = 2.0%, and σ = 0.18. The ...

The underlying stock for a European exchange option has S = $27.15, div = 2.0%, and
σ = 0.18. The strike stock has S = $30.00, div = 0.0%, and σ = 0.22. The two stocks have a correlation coefficient of 0.73. If the exchange option expires in 2

12

elf_fu   999   19 Replies

prateek gupta

Which of the following statements about the yearly-rate-of-return method (also known as the Belth ...

Which of the following statements about the yearly-rate-of-return method (also known as the Belth ...

Which of the following statements about the yearly-rate-of-return method (also known as the Belth method) of calculating the yearly rate of return for a life insurance policy is (are) true?
I.   The formula requires the use of benchmark prices per

JamesLu   193   3 Replies

Braxton Tipton

ABC Company insured its building on a replacement cost basis for $700,000 under a property insurance ...

ABC Company insured its building on a replacement cost basis for $700,000 under a property insurance ...

ABC Company insured its building on a replacement cost basis for $700,000 under a property insurance policy that included an 80 percent coinsurance clause. The building had a replacement cost of $1 million when it sustained a $40,000 loss. How much w

AzJose   252   3 Replies

lokyiu cheung

Consider a two-period binomial model, where each period is 6 months. Assume the stock price is ...

Consider a two-period binomial model, where each period is 6 months. Assume the stock price is ...

Consider a two-period binomial model, where each period is 6 months. Assume the stock price is $60.00, σ = 0.30, r = 0.05. An American put option with a strike price of $65 would be exercised early at what dividend yield?
A) 5.0%
B) 6.0%

elf_fu   211   3 Replies

felicity feng

Consider a one-period binomial model of 12 months. Assume the stock price is $54.00, σ = 0.25, r = ...

Consider a one-period binomial model of 12 months. Assume the stock price is $54.00, σ = 0.25, r = ...

Consider a one-period binomial model of 12 months. Assume the stock price is $54.00,
σ = 0.25, r = 0.04 and the exercise price of a call option is $55. What is the forecasted price of the stock given a downward movement during the year?
A)

elf_fu   268   2 Replies

fccjohnson

Assume that a $75 strike call has a 1.0% continuous dividend, 90 days until expiration and stock ...

Assume that a $75 strike call has a 1.0% continuous dividend, 90 days until expiration and stock ...

Assume that a $75 strike call has a 1.0% continuous dividend, 90 days until expiration and stock price of $72.00. What is the rho of the option as the interest rate changes from 6.0% to 5.0%?
A) 0.07
B) 0.12
C) 0.16
D) 0.20

elf_fu   219   2 Replies

calc

Disadvantages of the capital retention approach include which of the following?I.Assets are often ...

Disadvantages of the capital retention approach include which of the following?I.Assets are often ...

Disadvantages of the capital retention approach include which of the following?
I.   Assets are often liquidated too quickly.
II.   It underestimates the amount of life insurance needed.
A) I only
B) II only
C) both I and II

JamesLu   271   2 Replies

Austin Braly

A stock is selling for $41.60. The strike price on a call, maturing in 6 months, is $45. The ...

A stock is selling for $41.60. The strike price on a call, maturing in 6 months, is $45. The ...

A stock is selling for $41.60. The strike price on a call, maturing in 6 months, is $45. The possible stock prices at the end of 6 months are $35.00 and $49.00. Interest rates are 5.0%. Given an under-priced option, what are the short sale proceeds i

elf_fu   561   7 Replies

Zhao Yibo

Which of the following statements about dividend options is (are) true?I.The interest on dividends ...

Which of the following statements about dividend options is (are) true?I.The interest on dividends ...

Which of the following statements about dividend options is (are) true?
I.   The interest on dividends left to accumulate with the insurer is not considered to be taxable income.
II.   Paid-up additions are additional units of whole life insura

AzJose   180   3 Replies

Sheena Gamboa

The value of an Asian put option is computed using the geometric average strike. What is the ...

The value of an Asian put option is computed using the geometric average strike. What is the ...

The value of an Asian put option is computed using the geometric average strike. What is the expected payoff if the observed prices to date are 71, 72, 70, 68, 69, and 68, respectively?
A) 1.35
B) 1.45
C) 1.55
D) 1.65

elf_fu   201   2 Replies

Christine Tucker

The value of an Asian call option is computed using the geometric average strike. What is the ...

The value of an Asian call option is computed using the geometric average strike. What is the ...

The value of an Asian call option is computed using the geometric average strike. What is the expected payoff if the observed prices to date are 69, 70, 72, 71, 75, and 73, respectively?
A) 1.26
B) 1.36
C) 1.46
D) 1.56

elf_fu   303   3 Replies

Christine Tucker