A Firm Estimates That the Loss from a Weather-Related Closing

question 9

Multiple Choice

A firm estimates that the loss from a weather-related closing is $10 million and the probability of occurrence is 0.1% over the next year.If claims are paid at the end of the year,the annual risk-free rate is 5%,the market risk premium is 6%,and the beta of these losses is 0.5,compute the insurance premium.

• A)$8198
• B)$8918
• C)$9259
• D)$9598
• E)$8574

Evaluate the conditions under which a contract can be declared void due to mistake.

Understand the principles of contract voidability, including the concepts of undue influence, duress, and misrepresentation.

Identify the circumstances under which a contract can be rescinded or set aside.

Recognize the difference between void and voidable contracts.

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Definitions:

Marginal Tax Rate

The rate at which your last dollar of income is taxed, representing the percentage of tax applied to your income for each tax bracket in which you qualify.

Salvage Value

An asset's expected selling price once it has concluded its period of usefulness.

Sunk Costs

Past expenditures that have already been incurred and cannot be recovered.

Incremental Cash Flows

The extra cash flow from operations generated by a company when it embarks on a new project.