
EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 8220103675925
Author: BREALEY
Publisher: YUZU
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Question
Chapter 1, Problem 1QP
Summary Introduction
To choose: The term that matches each sentence.
Expert Solution & Answer

Explanation of Solution
- a) Investment decision: The decision made by the top management respective to the amount of funds that has to be deployed in the investment opportunities are investment decisions. Thus, the expenditures on the research and development are investment decisions.
- b) Financial asset: The asset that are not physical and whose value are derived from the contractual claim is known as the financial asset. Thus, a bank loan is a financial asset.
- c) Public corporation: The shares of the company that are traded freely in the stock exchange is known as public corporation. Thus, public corporation are listed on stock exchange.
- d) Corporations: These are separate and distinct entities from the owners. It is a voluntary associations of persons formed and organized to carry on a business. There are unlimited number of shareholders, shareholders can participate in managing the business. Liability is limited to the extent of shares held.
- e) Treasurer: An individual who is accountable for running the treasury in an organization is known as the treasurer. However, a treasurer is responsible for the bank relationship.
- f) Agency cost: The cost that results from the conflict of interest that takes place among the shareholders and managers and the amount that are charged by the agent of a company like the auditors and lawyers is known as agency cost.
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Question 6
A five-year $50,000 endowment insurance for (60) has $1,000 underwriting expenses, 25% of the first
premium is commission for the agent of record and renewal expenses are 5% of subsequent premiums.
Write the gross future loss random variable:
Presuming a portfolio of 10,000 identical and independent policies, the expected loss and the variance
of the loss of the portfolio are given below (note that the premium basis is not given or needed):
E[L] = 10,000(36,956.49 - 3.8786P)
V[L] 10,000 (50,000 + 14.52P)². 0.00095
Find the premium that results in a 97.5% probability of profit (i.e. ¹ (0.975) = 1.96).
Premium:
Please show your work below
Chapter 1 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
Ch. 1 - Prob. 1QPCh. 1 - Financial Decisions. Which of the following are...Ch. 1 -
Financial Decisions. What is the difference...Ch. 1 - Prob. 4QPCh. 1 -
Real and Financial Assets. Read the following...Ch. 1 - Prob. 6QPCh. 1 - Prob. 7QPCh. 1 - Prob. 8QPCh. 1 -
Corporations. What is limited liability, and who...Ch. 1 - Prob. 10QP
Ch. 1 - Prob. 11QPCh. 1 - Prob. 12QPCh. 1 - Prob. 13QPCh. 1 -
Goals of the Firm. Give an example of an action...Ch. 1 -
Cost of Capital. Why do financial managers refer...Ch. 1 -
Goals of the Firm. You may have heard big...Ch. 1 - Prob. 17QPCh. 1 - Prob. 18QPCh. 1 - Prob. 19QPCh. 1 - Prob. 20QPCh. 1 - Prob. 21QPCh. 1 -
Cost of Capital. British Quince comes across an...Ch. 1 - Cost of Capital. In a stroke of good luck, your...Ch. 1 - Prob. 24QPCh. 1 - Prob. 25QPCh. 1 - Prob. 26QPCh. 1 - Prob. 27QPCh. 1 - Prob. 28QPCh. 1 - Prob. 29QPCh. 1 - Prob. 30QPCh. 1 - Prob. 31QPCh. 1 - Prob. 32QPCh. 1 - Prob. 33QPCh. 1 - Prob. 34QPCh. 1 - Prob. 35QPCh. 1 - Prob. 36QPCh. 1 -
Ethics. Is there a conflict between “doing well”...Ch. 1 -
Ethics. Look at some of the practices described...
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