This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Life insurance policyholders typically receive dividends from A) mutual insurance companies. ... (Read 51 times)

debasdf

  • Hero Member
  • *****
  • Posts: 570
on: Jul 11, 2018
Life insurance policyholders typically receive dividends from
 
  A)
 
  mutual insurance companies.
  B)
 
  stock insurance companies.
  C)
 
  both mutual and stock insurance companies.
  D)
 
  neither mutual nor stock insurance companies.

Question 2

Derek owns a perpetuity contract that promises to pay him 1,000 per year in end-of the-year cash flows with the first cash flow beginning one year from today.
 
  Derek perceives some risk with the promised cash flows and has discounted them at an annual rate of 10.00 to determine the present value of the contract. Derek has offered to sell a portion of the contract to his brother Cam. The agreement is that Derek will keep the first 25 cash flows and that Cam will keep the remaining cash flows beginning with the first cash flow 26 years from today. What is the present value of the original contract? What is the present value of the first 25 cash flows? What is the present value of the cash flows received in year 26 and beyond? If Derek makes the deal as described and charges Cam 1,000 for the year 26 and beyond cash flows, which brother is getting a better deal? Please provide dollar values for each of these questions.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Joc

  • Sr. Member
  • ****
  • Posts: 317
Reply #1 on: Jul 11, 2018
Answer to Question 1

A

Answer to Question 2

PV of contract = 10,000, PV of first 25 cash flows = 9,077.04, PV of remaining cash flows = 922.96. Derek gets the better deal, he is selling cash flows with a PV of 922.96 for 1,000.


debasdf

  • Member
  • Posts: 570
Reply 2 on: Jul 11, 2018
Great answer, keep it coming :)

bulacsom

  • Member
  • Posts: 329
Reply 3 on: Yesterday
Gracias!

« previous next »
 

Did you know?

Only 12 hours after an egg cell is fertilized by a sperm cell, the egg cell starts to divide. As it continues to divide, it moves along the fallopian tube toward the uterus at about 1 inch per day.

Did you know?

When taking monoamine oxidase inhibitors, people should avoid a variety of foods, which include alcoholic beverages, bean curd, broad (fava) bean pods, cheese, fish, ginseng, protein extracts, meat, sauerkraut, shrimp paste, soups, and yeast.

Did you know?

According to research, pregnant women tend to eat more if carrying a baby boy. Male fetuses may secrete a chemical that stimulates their mothers to step up her energy intake.

Did you know?

In most cases, kidneys can recover from almost complete loss of function, such as in acute kidney (renal) failure.

Did you know?

Bacteria have been found alive in a lake buried one half mile under ice in Antarctica.

The life cycle of a zygomycete, the black bread mould Rhizopus stolonifer. The life cycle of a zygomycete, the black bread mould Rhizopus stolonifer.
A rich diversity of life lives in and among coral reefs. A rich diversity of life lives in and among coral reefs.
Major Findings of the High Scope Preschool Study High Scope participants showed better academic per Major Findings of the High Scope Preschool Study High Scope participants showed better academic per
life life
The Life Cycle of a Midlatitude Cyclone: Cyclogenesis The Life Cycle of a Midlatitude Cyclone: Cyclogenesis
The energy cycle of life The energy cycle of life
Video: Bond in biological molecules (Ionic, Covalent and Hydrogen bonds)/ How atoms bond?

For a complete list of videos, visit our video library