My brother just charged his friend $600 for offering a bet: if the temperature of tomorrow is above 76, my brother will pay 1.5 times $600 to his friend; if the temperature is below 76 tomorrow, my brother will pay 0.5 times $600 to his friend. I do not want my brother to lose money when tomorrow's temperature is above 76 and decide to buy an insurance that will make my brother break even when tomorrow's temperature is above 76 (in other words, the insurance policy will pay my brother 0.5 times $600 when tomorrow's temperature is above 76). If risk free rate is zero, how much should I pay for this insurance (keep two decimal places)? Your Answer: Answer

My brother just charged his friend $600 for offering a bet: if the temperature of tomorrow is above 76, my brother will pay 1.5 times $600 to his friend; if the temperature is below 76 tomorrow, my brother will pay 0.5 times $600 to his friend. I do not want my brother to lose money when tomorrow's temperature is above 76 and decide to buy an insurance that will make my brother break even when tomorrow's temperature is above 76 (in other words, the insurance policy will pay my brother 0.5 times $600 when tomorrow's temperature is above 76). If risk free rate is zero, how much should I pay for this insurance (keep two decimal places)? Your Answer: Answer

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Jim just got a coding job so he will need a new laptop. He finds a good one, which costs $20,000 and can be used for 6 years. After that, the computer will be useless with zero salvage value due to a massive coding work. Jim has insufficient money to buy it, but he can borrow funds at an annual interest rate of 2.5%. The tax rate is 28%. The store said if Jim chooses to lease the laptop, Jim will pay for $3,500 per year (pre-tax). What is the amount of the after- tax lease payment? a) $1,067.5 b) $2,520 c) $980 d) $87.5 e) $14,400
(Related to Checkpoint 5.5) (Solving for n) Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new $330,000 Rolls-Royce Phantom. Jack currently has $51,270 that he may invest. He has found a mutual fund with an expected annual return of 4.5 percent in which he will place the money. How long will it take Jack to win Jill's hand in marriage? Ignore taxes and inflation. The number of years it will take for Jack to win Jill's hand in marriage is 19 years. (Round to one decimal place.)
(Related to Checkpoint 5.5) (Solving for n) Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new $330,000 Rolls-Royce Phantom. Jack currently has $19,770 that he may invest. He has found a mutual fund with an expected annual return of 6.5 percent in which he will place the money. How long will it take Jack to win Jill's hand in marriage? Ignore taxes and inflation. The number of years it will take for Jack to win Jill's hand in marriage is C years. (Round to one decimal place.)
Taylor Jones has a Insurance policy that returns every cent she pays in premiums if she outlives the term of the policy. She knows this policy costs 30 to 50 percent more than a traditional policy but thinks it is worth it. What type of term life insurance does Taylor have?
Nathan decided to invest 10000 CZK. He could earn either (as net yield after subtracting the principal sum) 1000 CZK or he could lose invested money. Explain how insurance cold arrange the investment more convenient for him!
John has 50/250/25 car insurance. Last week he caused a car accident that damaged the following:: Al's car = $2000 damage Bob's car = $6000 damage Charlie's car = $5000 damage Telephone pole = $4000 damage Guard rail = $5000 damage Based on John's insurance, how much will the insurance company have to pay for the damage?
Rhett made his annual gambling trip to Uwin Casino. On this trip Rhett won $430 at the slots and $1,380 at poker. Also this year, Rhett made several trips to the racetrack, but he lost $790 on his various wagers. What amount must Rhett include in his gross income?
Geoff recently graduated from a state university with a degree in art history. He has no student loans and has saved $7,000 toward retirement while in school. He's heard rumors about the stock market being unstable right now, and he has friends his age who have seen their investment accounts go down in value. Geoff has decided to keep his money in a savings account until mutual fund returns look better; then he will invest the money. 1 2 3 4 Did Geoff make a good decision to keep his money in a savings account until the market goes back up? Why or why not? If he did put his money in the stock market instead of a savings account, should he leave it alone or take it out when the market goes down? Explain your answer. For long-term savings, what is the better option: Keep your money in a savings account or invest it into the stock market? Why? If Geoff came to you for advice about his money situation, what would you tell him?
The answer should be well explained
I own a bike that value at $1,000. I list it for sale on Craigslist. Barney sees the bike and determine that it would be worth up to $1,500 to him. He offers me $1,200 and I accept. Before Barney can pick up the bike, Charles stops by my house to look at the bike. He determines the bike would be worth $1,700 to him and he offers me $1,500. I sell the bike to Charles. Barney successfully sues me for breach of contract. If the court orders me to pay expectation damages, what is my net gain, if any, from the sale of the bike? [Be sure to deduct the value of the bike.]
Simon is considering purchasing an emu, which he can graze for free in his backyard. Once the emu reaches maturity (in exactly three years), Simon will be able to sell it for $2,000. The emu costs $1,500. a. Suppose that interest rates are 8%. Calculate the net present value of the emu investment. Does the NPV indicate that Simon should buy the emu? b. Suppose that Simon passes on the emu deal, and invests $1,500o in his next-best opportunity: a safe government bond yielding 8%. Is this outcome better or worse than buying the emu? Please explain.
A new company down the street is thinking about buying a radio system. Their purchasing agent, Harry, is my next-door neighbor. Harry asks me if he can "borrow" a MR-808BC from me to test out. I don't like to do that, but Harry offers me $1,200 cash to use the Broadcaster for two months. I take his $1,200 cash and loan him the MR-808BC. I deposit the $1,200 in the bank. I have been interested in the possibility of going into the rental business. This is a good opportunity to see how it will work and what results it may produce. ***For this transaction, you may do journal entries to accomplish all of the accounting necessary. Be mindful of all of the accounts impacted by this transaction. What is the JE's for the scenario above? Or is this ignored for business purposes?

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