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olganol [36]
2 years ago
6

You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 10 percent, -10 percent, 17 per

cent, 22 percent, and 10 percent. Suppose the average inflation rate over this period was 1.5 percent and the average T-bill rate over the period was 3 percent.
a. What was the average real return on Crash-n-Burn's stock?
b. What was the average nominal risk premium on Crash-n-Burn's stock?
Business
1 answer:
defon2 years ago
6 0

Answer:

Crash-n-Burn Computers

a. The average real return on Crash-n-Burn's stock is:

= 8.3%

b. The average nominal risk premium on Crash-n-Burn's stock is:

= 6.8%

Explanation:

a) Data and Calculations:

Average inflation rate = 1.5%

Average T-bill rate = 3%

Returns on stock:

Year 1 = 10%

Year 2 = -10%

Year 3 = 17%

Year 4 = 22%

Year 5 = 10%

Total returns  = 49%

Average returns = Total returns/number of years

= 9.8% (49%/5)

Average real returns

= Average returns on the stock minus the inflation rate

= 8.3% (9.8% - 1.5%)

Average nominal risk premium = return on the stock minus the return on the T-bill

= 9.8% - 3%

= 6.8%

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An insurer sells a very large number of policies to people with the following loss distribution: $100,000 with probability 0.005
kogti [31]

Answer:

a) $2000

b)  $1,886.7925

C) $2,036.7925

Explanation:

First, the question states to determine the expected claim cost per policy

Expected Claim Cost represents the fund required to be paid by an insurer for a particular contract or a group of contracts as the case maybe. This is usually based on the policy taken.

A) Expected Claim Cost per policy

= (Policy Loss Value A x its probability) + (Policy Loss Value B x its probability) + (Policy Loss Value C x its probability)+(Policy Loss Value D x its probability)+ (Policy Loss Value E x its probability)

= ( (100000 x 0.005 )+ (60000 x 0.010) + (20000 x 0.02) + (10000 x 0.05) + 0 = $2000

Part B: discounted expected claim cost per policy

Since, the sum of $2000 is expected to be paid by the insurer by the end of the year, the interest to be earned based on the rate  (discounting used)

=$2,000 ÷ (1  + 0.06)

= $1,886.7925

Part C:: Determine the Fair Premium

Fair Premium is calculated as follows

The discounted policy claim cost + the Processing Cost per application + The fair profit loading

= $1,886.7925+ $100+50 = $2,036.7925

3 0
3 years ago
The full disclosure principle requires a balance between_______________.
N76 [4]

Answer:

Relevance and cost effectiveness  

Explanation:

Full disclosure principle means that a business should report all the relevant and necessary information regarding their financial statement to the people who are accustomed to reading it as not disclosing full information might affect the readers understanding.

It prevents any lack of information from the business's financial information and helps to ensure that  creditors, stakeholders and investors are aware of all the relevant information while making key decisions that affect the company.

Not disclosing all the information could manipulate the companies financial statement and it may look stronger that it really is.

3 0
2 years ago
Software is considered the _______________ part of the computer, whereas the hardware is considered the _______________ part. ex
asambeis [7]

variable, invariable

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2 years ago
given that jacob's chocolates had owner investments of $4,000; net income during the period of $10,000; and owner withdrawals of
jonny [76]

Based on the owner investments, the net income and the owner withdrawals, the ending balance in the owner's capital account is $13,700

<h3>What is the ending balance in owner's capital?</h3>

The ending balance in the owner's capital can be found as:

= Beginning owner investments + Net income during the period - Owner withdrawals

Solving for the ending balance gives:

= 4,000 + 10,000 - 300

= 14,000 - 300

= $13,700

Find out more on owner capital balance at brainly.com/question/13199093

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3 0
1 year ago
Entrepreneurs emphasize the importance of believing in your own ideas because in the process of developing those ideas you are l
Sveta_85 [38]

Answer:

B. Self-directed and self-nurturing.

Explanation:

Self-directed means directed or guided without anyone else, particularly as an autonomous agent.

Self-nurturing is taking care of yourself. Numerous individuals put themselves at the base of their own rundown of needs. The outcome is burnout, fatigue and hatred. Self-nurturing doesn't need to be troublesome or excessively time-consuming.

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