The concept of risk and basics of insurance underwriting

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Answer 1

Question

Chapter 8, Problem 1LO

Summary Introduction

To discuss: The concept of risk and basics of insurance underwriting

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Explanation of Solution

Risk:

Risk refers to the chances of incurring economic losses. The financial risk is associated with those things in which the individual have financial interest such as life of an individual, home, car, health and business. In order to mitigate these financial losses various strategies are used by the individuals which are as follows:

Risk avoidance: The individuals try to avoid those activities and actions that involve the risk of loss. It is adopted whenever the cost of avoiding the risk is less than the cost of handling that risk in some other way.
Loss prevention and loss control: Loss prevention includes those activities that reduce the chances of occurrence of a risk and loss control refers to those activities that reduce the severity of loss in case it occurs.
Risk assumption: The technique used to bear the risk of loss. It is suitable the risk involved is of smaller amount and insurance proves to be an expensive choice.
Insurance: A contract undertaken to mitigate the loss in case of its occurrence in exchange of the smaller amounts in the form of insurance premium is known as the insurance.

Underwriting refers to the process of deciding to whom the insurance coverage is to be provided and the amount of premium to be charged so that it represent the fair charges for covering the chances of loss. Underwriting helps the insurance companies to save themselves from the adverse selection, where the clients having higher risk apply for the insurance and gets the coverage. The underwriting process tries to improve always by the insurer so as to provide the exact cover to policyholders and be it attractive and competitive.

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You've collected the following information from your favorite financial website. 52-Week Price Dividend Hi 77.40 Lo Stock (Dividend) Yield % PE Ratio Close Price Net Change 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.04 70.05 YBM 2.55 2.9 10 89.08 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 20.74 Winter Sports .32 1.5 28 15.43 ?? -.26 .18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 21 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.75 percent, indefinitely. Assume investors require a return of 14 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

1. Waterfront Inc. wishes to borrow on a short-term basis without reducing its current ratio below 1.25. At present its current assets and current liabilities are $1,600 and $1,000 respectively. How much can Waterfront Inc. borrow?

Answer 2

Question

Chapter 8, Problem 1LO

Summary Introduction

To discuss: The concept of risk and basics of insurance underwriting

Expert Solution & Answer

Explanation of Solution

Risk:

Risk refers to the chances of incurring economic losses. The financial risk is associated with those things in which the individual have financial interest such as life of an individual, home, car, health and business. In order to mitigate these financial losses various strategies are used by the individuals which are as follows:

Risk avoidance: The individuals try to avoid those activities and actions that involve the risk of loss. It is adopted whenever the cost of avoiding the risk is less than the cost of handling that risk in some other way.
Loss prevention and loss control: Loss prevention includes those activities that reduce the chances of occurrence of a risk and loss control refers to those activities that reduce the severity of loss in case it occurs.
Risk assumption: The technique used to bear the risk of loss. It is suitable the risk involved is of smaller amount and insurance proves to be an expensive choice.
Insurance: A contract undertaken to mitigate the loss in case of its occurrence in exchange of the smaller amounts in the form of insurance premium is known as the insurance.

Underwriting refers to the process of deciding to whom the insurance coverage is to be provided and the amount of premium to be charged so that it represent the fair charges for covering the chances of loss. Underwriting helps the insurance companies to save themselves from the adverse selection, where the clients having higher risk apply for the insurance and gets the coverage. The underwriting process tries to improve always by the insurer so as to provide the exact cover to policyholders and be it attractive and competitive.

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Answer 3

Question

Chapter 8, Problem 1LO

Summary Introduction

To discuss: The concept of risk and basics of insurance underwriting

Expert Solution & Answer

Explanation of Solution

Risk:

Risk refers to the chances of incurring economic losses. The financial risk is associated with those things in which the individual have financial interest such as life of an individual, home, car, health and business. In order to mitigate these financial losses various strategies are used by the individuals which are as follows:

Risk avoidance: The individuals try to avoid those activities and actions that involve the risk of loss. It is adopted whenever the cost of avoiding the risk is less than the cost of handling that risk in some other way.
Loss prevention and loss control: Loss prevention includes those activities that reduce the chances of occurrence of a risk and loss control refers to those activities that reduce the severity of loss in case it occurs.
Risk assumption: The technique used to bear the risk of loss. It is suitable the risk involved is of smaller amount and insurance proves to be an expensive choice.
Insurance: A contract undertaken to mitigate the loss in case of its occurrence in exchange of the smaller amounts in the form of insurance premium is known as the insurance.

Underwriting refers to the process of deciding to whom the insurance coverage is to be provided and the amount of premium to be charged so that it represent the fair charges for covering the chances of loss. Underwriting helps the insurance companies to save themselves from the adverse selection, where the clients having higher risk apply for the insurance and gets the coverage. The underwriting process tries to improve always by the insurer so as to provide the exact cover to policyholders and be it attractive and competitive.

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Answer 4

Question

Chapter 8, Problem 1LO

Summary Introduction

To discuss: The concept of risk and basics of insurance underwriting

Expert Solution & Answer

Explanation of Solution

Risk:

Risk refers to the chances of incurring economic losses. The financial risk is associated with those things in which the individual have financial interest such as life of an individual, home, car, health and business. In order to mitigate these financial losses various strategies are used by the individuals which are as follows:

Risk avoidance: The individuals try to avoid those activities and actions that involve the risk of loss. It is adopted whenever the cost of avoiding the risk is less than the cost of handling that risk in some other way.
Loss prevention and loss control: Loss prevention includes those activities that reduce the chances of occurrence of a risk and loss control refers to those activities that reduce the severity of loss in case it occurs.
Risk assumption: The technique used to bear the risk of loss. It is suitable the risk involved is of smaller amount and insurance proves to be an expensive choice.
Insurance: A contract undertaken to mitigate the loss in case of its occurrence in exchange of the smaller amounts in the form of insurance premium is known as the insurance.

Underwriting refers to the process of deciding to whom the insurance coverage is to be provided and the amount of premium to be charged so that it represent the fair charges for covering the chances of loss. Underwriting helps the insurance companies to save themselves from the adverse selection, where the clients having higher risk apply for the insurance and gets the coverage. The underwriting process tries to improve always by the insurer so as to provide the exact cover to policyholders and be it attractive and competitive.

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Answer 5

Chapter 8, Problem 1LO

Summary Introduction

To discuss: The concept of risk and basics of insurance underwriting

Expert Solution & Answer

Explanation of Solution

Risk:

Risk refers to the chances of incurring economic losses. The financial risk is associated with those things in which the individual have financial interest such as life of an individual, home, car, health and business. In order to mitigate these financial losses various strategies are used by the individuals which are as follows:

Risk avoidance: The individuals try to avoid those activities and actions that involve the risk of loss. It is adopted whenever the cost of avoiding the risk is less than the cost of handling that risk in some other way.
Loss prevention and loss control: Loss prevention includes those activities that reduce the chances of occurrence of a risk and loss control refers to those activities that reduce the severity of loss in case it occurs.
Risk assumption: The technique used to bear the risk of loss. It is suitable the risk involved is of smaller amount and insurance proves to be an expensive choice.
Insurance: A contract undertaken to mitigate the loss in case of its occurrence in exchange of the smaller amounts in the form of insurance premium is known as the insurance.

Underwriting refers to the process of deciding to whom the insurance coverage is to be provided and the amount of premium to be charged so that it represent the fair charges for covering the chances of loss. Underwriting helps the insurance companies to save themselves from the adverse selection, where the clients having higher risk apply for the insurance and gets the coverage. The underwriting process tries to improve always by the insurer so as to provide the exact cover to policyholders and be it attractive and competitive.

Answer 6

Chapter 8, Problem 1LO

Summary Introduction

To discuss: The concept of risk and basics of insurance underwriting

Expert Solution & Answer

Explanation of Solution

Risk:

Risk refers to the chances of incurring economic losses. The financial risk is associated with those things in which the individual have financial interest such as life of an individual, home, car, health and business. In order to mitigate these financial losses various strategies are used by the individuals which are as follows:

Risk avoidance: The individuals try to avoid those activities and actions that involve the risk of loss. It is adopted whenever the cost of avoiding the risk is less than the cost of handling that risk in some other way.
Loss prevention and loss control: Loss prevention includes those activities that reduce the chances of occurrence of a risk and loss control refers to those activities that reduce the severity of loss in case it occurs.
Risk assumption: The technique used to bear the risk of loss. It is suitable the risk involved is of smaller amount and insurance proves to be an expensive choice.
Insurance: A contract undertaken to mitigate the loss in case of its occurrence in exchange of the smaller amounts in the form of insurance premium is known as the insurance.

Underwriting refers to the process of deciding to whom the insurance coverage is to be provided and the amount of premium to be charged so that it represent the fair charges for covering the chances of loss. Underwriting helps the insurance companies to save themselves from the adverse selection, where the clients having higher risk apply for the insurance and gets the coverage. The underwriting process tries to improve always by the insurer so as to provide the exact cover to policyholders and be it attractive and competitive.

Answer 7

Chapter 8, Problem 1LO

Summary Introduction

To discuss: The concept of risk and basics of insurance underwriting

Answer 8

Expert Solution & Answer

Explanation of Solution

Risk:

Risk refers to the chances of incurring economic losses. The financial risk is associated with those things in which the individual have financial interest such as life of an individual, home, car, health and business. In order to mitigate these financial losses various strategies are used by the individuals which are as follows:

Risk avoidance: The individuals try to avoid those activities and actions that involve the risk of loss. It is adopted whenever the cost of avoiding the risk is less than the cost of handling that risk in some other way.
Loss prevention and loss control: Loss prevention includes those activities that reduce the chances of occurrence of a risk and loss control refers to those activities that reduce the severity of loss in case it occurs.
Risk assumption: The technique used to bear the risk of loss. It is suitable the risk involved is of smaller amount and insurance proves to be an expensive choice.
Insurance: A contract undertaken to mitigate the loss in case of its occurrence in exchange of the smaller amounts in the form of insurance premium is known as the insurance.

Underwriting refers to the process of deciding to whom the insurance coverage is to be provided and the amount of premium to be charged so that it represent the fair charges for covering the chances of loss. Underwriting helps the insurance companies to save themselves from the adverse selection, where the clients having higher risk apply for the insurance and gets the coverage. The underwriting process tries to improve always by the insurer so as to provide the exact cover to policyholders and be it attractive and competitive.

Answer 9

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Answer 10

Expert Solution & Answer

Answer 11

Ch. 8 - Prob. 1LO Ch. 8 - Prob. 2LO Ch. 8 - Prob. 3LO Ch. 8 - Prob. 4LO Ch. 8 - Prob. 5LO Ch. 8 - Prob. 6LO Ch. 8 - Prob. 1FPE Ch. 8 - Prob. 2FPE Ch. 8 - Prob. 3FPE Ch. 8 - Prob. 4FPE

The concept of risk and basics of insurance underwriting

To discuss: The concept of risk and basics of insurance underwriting

Explanation of Solution

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