The expected return on a life insurance policy. The Expected return: The expected return on an investment refers to the weighted average of estimated returns and estimation of occurrence of those returns. Life Insurance Policy: Life insurance policy is an agreement between two parties, the two parties are the insurance company and the policy buyer. The insurance company depicts to pay a predetermined amount to the policy holder in case of specified future events.

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Answer 1

Question

Chapter 8, Problem 3Q

a)

Summary Introduction

To explain: The expected return on a life insurance policy.

The Expected return:

The expected return on an investment refers to the weighted average of estimated returns and estimation of occurrence of those returns.

Life Insurance Policy:

Life insurance policy is an agreement between two parties, the two parties are the insurance company and the policy buyer. The insurance company depicts to pay a predetermined amount to the policy holder in case of specified future events.

b.

Summary Introduction

To explain: The correlation coefficient between the return on the insurance policy and the return on the human capital.

Correlation Coefficient:

A correlation coefficient is a tool of statistical measure. This tool measures the relation between the two variables. It measures how the change in one value of variable affects the other.

c.

Summary Introduction

To explain: The reason for buying the life insurance in spite of low expected returns.

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General Finance Question

Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896

Answer 2

Question

Chapter 8, Problem 3Q

a)

Summary Introduction

To explain: The expected return on a life insurance policy.

The Expected return:

The expected return on an investment refers to the weighted average of estimated returns and estimation of occurrence of those returns.

Life Insurance Policy:

Life insurance policy is an agreement between two parties, the two parties are the insurance company and the policy buyer. The insurance company depicts to pay a predetermined amount to the policy holder in case of specified future events.

b.

Summary Introduction

To explain: The correlation coefficient between the return on the insurance policy and the return on the human capital.

Correlation Coefficient:

A correlation coefficient is a tool of statistical measure. This tool measures the relation between the two variables. It measures how the change in one value of variable affects the other.

c.

Summary Introduction

To explain: The reason for buying the life insurance in spite of low expected returns.

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Answer 3

Question

Chapter 8, Problem 3Q

a)

Summary Introduction

To explain: The expected return on a life insurance policy.

The Expected return:

The expected return on an investment refers to the weighted average of estimated returns and estimation of occurrence of those returns.

Life Insurance Policy:

Life insurance policy is an agreement between two parties, the two parties are the insurance company and the policy buyer. The insurance company depicts to pay a predetermined amount to the policy holder in case of specified future events.

b.

Summary Introduction

To explain: The correlation coefficient between the return on the insurance policy and the return on the human capital.

Correlation Coefficient:

A correlation coefficient is a tool of statistical measure. This tool measures the relation between the two variables. It measures how the change in one value of variable affects the other.

c.

Summary Introduction

To explain: The reason for buying the life insurance in spite of low expected returns.

Expert Solution & Answer

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Answer 4

Question

Chapter 8, Problem 3Q

a)

Summary Introduction

To explain: The expected return on a life insurance policy.

The Expected return:

The expected return on an investment refers to the weighted average of estimated returns and estimation of occurrence of those returns.

Life Insurance Policy:

Life insurance policy is an agreement between two parties, the two parties are the insurance company and the policy buyer. The insurance company depicts to pay a predetermined amount to the policy holder in case of specified future events.

b.

Summary Introduction

To explain: The correlation coefficient between the return on the insurance policy and the return on the human capital.

Correlation Coefficient:

A correlation coefficient is a tool of statistical measure. This tool measures the relation between the two variables. It measures how the change in one value of variable affects the other.

c.

Summary Introduction

To explain: The reason for buying the life insurance in spite of low expected returns.

Expert Solution & Answer

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Answer 5

Chapter 8, Problem 3Q

a)

Summary Introduction

To explain: The expected return on a life insurance policy.

The Expected return:

The expected return on an investment refers to the weighted average of estimated returns and estimation of occurrence of those returns.

Life Insurance Policy:

Life insurance policy is an agreement between two parties, the two parties are the insurance company and the policy buyer. The insurance company depicts to pay a predetermined amount to the policy holder in case of specified future events.

b.

Summary Introduction

To explain: The correlation coefficient between the return on the insurance policy and the return on the human capital.

Correlation Coefficient:

A correlation coefficient is a tool of statistical measure. This tool measures the relation between the two variables. It measures how the change in one value of variable affects the other.

c.

Summary Introduction

To explain: The reason for buying the life insurance in spite of low expected returns.

Answer 6

Chapter 8, Problem 3Q

a)

Summary Introduction

To explain: The expected return on a life insurance policy.

The Expected return:

The expected return on an investment refers to the weighted average of estimated returns and estimation of occurrence of those returns.

Life Insurance Policy:

Life insurance policy is an agreement between two parties, the two parties are the insurance company and the policy buyer. The insurance company depicts to pay a predetermined amount to the policy holder in case of specified future events.

Answer 7

Chapter 8, Problem 3Q

a)

Summary Introduction

To explain: The expected return on a life insurance policy.

The Expected return:

The expected return on an investment refers to the weighted average of estimated returns and estimation of occurrence of those returns.

Life Insurance Policy:

Life insurance policy is an agreement between two parties, the two parties are the insurance company and the policy buyer. The insurance company depicts to pay a predetermined amount to the policy holder in case of specified future events.

Answer 8

b.

Summary Introduction

To explain: The correlation coefficient between the return on the insurance policy and the return on the human capital.

Correlation Coefficient:

A correlation coefficient is a tool of statistical measure. This tool measures the relation between the two variables. It measures how the change in one value of variable affects the other.

Answer 9

b.

Summary Introduction

To explain: The correlation coefficient between the return on the insurance policy and the return on the human capital.

Correlation Coefficient:

A correlation coefficient is a tool of statistical measure. This tool measures the relation between the two variables. It measures how the change in one value of variable affects the other.

Answer 10

c.

Summary Introduction

To explain: The reason for buying the life insurance in spite of low expected returns.

Answer 11

c.

Summary Introduction

To explain: The reason for buying the life insurance in spite of low expected returns.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 8 - Suppose you owned a portfolio consisting of...Ch. 8 - Prob. 2Q Ch. 8 - Prob. 3Q Ch. 8 - Is it possible to construct a portfolio of...Ch. 8 - Stock A has an expected return of 7%, a standard...Ch. 8 - A stock had a 12% return last year, a year when...Ch. 8 - If investors aversion to risk increased, would the...Ch. 8 - Prob. 8Q Ch. 8 - In Chapter 7, we saw that if the market interest...Ch. 8 - Prob. 1P

To explain: The reason for buying the life insurance in spite of low expected returns.

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Chapter 8 Solutions