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3 years ago

How do insurance companys make money?

1 answer:

8 0

Most insurance companies generate revenue in two ways: Charging premiums in exchange for insurance coverage, then reinvesting those premiums into other interest-generating assets. Like all private businesses, insurance companies try to market effectively and minimize administrative costs

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Last year, Jose had to invest. He invested some of it in an account that paid simple interest per year, and he invested the rest

VladimirAG [237]

Answer:Please refer to the explanation section

Explanation:

The question is incomplete. We do not have the rate interest for both accounts. We also do not know how much is invested in each account. The question also has a typo, the question says "he invested some of it in an account that paid simple interest per year and invested the rest in an account that paid simple interest per year". We will make some assumption in order to provide a proper solution to this question

Assumptions:

Firstly we will assume he invested in a simple interest account and a compound interest account. assume

The total investment is $1000. $5000 is invested in each account.

Therefore the Present Value (PV) is $5000 for both accounts

Interest rate (R) is 10% per year for simple interest and 10% per per year Compounded monthly for compound interest account

Period (n) = 1 year

Simple Interest Account

Future Value (Simple Interest) = P(1 + Rn)

Future Value (Simple Interest) = $5000(1 + 0.10 x 1) = $5500

Interest from Simple interest account = 5500 - 5000 = $500

Compound interest Account

Future Value (Compound interest) = P(1 + R)^n

Future Value (Compound interest) = $5000(1 + 0.10/12)^12 = 5523.565337

Interest form Compound interest account = 5523.57 - 5000 = $523

compound interest account earned more interest than Simple interest Account

5 0

3 years ago

Read 2 more answers

A company is considering two projects. Project 1 has an initial investment of $60,000 and expected cash inflows of $20,000 each

Vikki [24]

Answer:

Project 1

Explanation:

The computation of the payback period is shown below:

As we know that

Payback period = Initial investment ÷ Net cash flow

For project 1

The payback period would be

= $60,000 ÷ $20,000

= 3 years

For project 2

The payback period would be

= $80,000 ÷ $20,000

= 4 years

Based on the payback period, project 1 should be chosen as the initial amount would be recovered in 3 years instead of 4 years shown in project 2

6 0

3 years ago

Read 2 more answers

Store A sells four times as many products as store B and one third as many as store C. If store C sells 105,960 products, how ma

nikitadnepr [17]

Answer: a. 8,830 products

Explanation:

Store A sells one third as many as Store C so if Store C sells 105,960 products, Store A would be selling:

= 105,960 / 3

= 35,320 products

Store A sells four times as many products are store B. If Store A sells 35,320 products, Store B would sell:

= 35,320 / 4

= 8,830 products

8 0

3 years ago

The natural rate of unemployment is 4%, and the economy is producing 95% of its potential output. Okun's law predicts an unemplo

Anon25 [30]

Answer:

so correct option is C. 6.5

Explanation:

given data

natural rate of unemployment = 4%

economy producing = 95%

solution

we know here as Okun's law for the every 1 percentage increase in unemployment rate

GDP of country = 2% lower than potential GDP

but here is country GDP = 5% lower than potential GDP

so there is increase in the unemployment rate = 5% ÷ 2 = 2.5%

and unemployment rate is given = 4%

so effective unemployment rate will be

effective unemployment rate = 4% + 2.5%

effective unemployment rate = 6.5%

so correct option is C. 6.5

6 0

3 years ago

Which of the following statements is true?a. Using accelerated depreciation rather than straight line would normally have no eff

IRISSAK [1]

Answer:

The correct answer is letter "A": Using accelerated depreciation rather than straight line would normally have no effect on a project's total projected cash flows but it would affect the timing of the cash flows and thus the NPV.

Explanation:

Accelerated depreciation is a form of accounting and taxation used in the first years of an asset to allow greater deductions. On the other hand, the deductions are distributed evenly throughout the life of the asset using the Straight-line Depreciation method. Accelerated depreciation facilitates higher expenses to be incurred during the first years of an asset while in use, and lower expenses years later, as long as the asset depreciates.

In that sense, when it comes to the total projected cash flow of a company on a project, neither the accelerated depreciation or the straight-line method would affect it but both of them have impact on the timing of the cash flows since accelerated depreciation demands higher expenses since the beginning of the possession of the assets while the straight-line method keeps the expenses steady. Both, also affect the net present value (NPV) of the company since with the accelerated depreciation the cash flow will be less and with the straight-line method it should be constant.

7 0

3 years ago