Chapter 12 homework 1. diversifiable risk. in light of what you’ve learned about market versus diversifiable (specific) risks, explain why an insurance company has no problem in selling life insurance to individuals but is reluctant to issue policies insuring against flood damage to residents of coastal areas. why don’t the insurance companies simply charge coastal residents a premium that reflects the actuarial probability of damage from hurricanes and other storms? 3. using beta. a stock with a beta of .8 has an expected rate of return of 12%. if the market return this year turns out to be 5 percentage points below expectations, what is your best guess as to the rate of return on the stock? 11. capm and expected return. if the risk-free rate is 6% and the expected rate of return on the market portfolio is 13%, is a security with a beta of 1.25 and an expected rate of return of 16% overpriced or underpriced?

Which of the following is most likely to lead to a general decrease in wages? a. elastic demand b. public goods c. an economic recovery d. immigration 2b2t

Afinancial institution, the thriftem bank, is in the process of formulating its loan policy for the next quarter. a total of $12 million is allocated for that purpose. being a full-service facility, the bank is obligated to grant loans to different clientele. the following table provides the types of loans, the interest rate charged by the bank, and the possibility of bad debt as estimated from past experience.type of loaninterest rateprobability of bad debtpersonal.140.10car.130.07home.120.03farm.125.05commercial.100.02 bad debts are assumed unrecoverable and hence produce no interest revenue either. competition with other financial institutions in the area requires that the bank allocate at least 40% of the total funds to farm and commercial loans. to assist the housing industry in the region, home loans must equal at least 50% of the personal, car, and home loans. the bank also has a stated policy specifying that the overall ratio for bad debts on all loans may not exceed .04. formulate this problem as a linear program. define your variables clearly and write all the constraints explaining the significance of each.

Monica needs to assess the slide sequence and make quick changes to it. which view should she use in her presentation program? a. outline b. slide show c. slide sorter d. notes page e. handout