1. Describe how to set up a loan amortization schedule.
2. November 21, 1980, was the day of a tragic fire in the MGM Grand Hotel in Las Vegas. At the time of the fire, the hotel had only $30 million of liability insurance. One month after the fire, the hotel bought an extra $170 million of liability coverage for a premium of $37.5 million, retroactive to November 1, 1980 (before the fire).
Based on your knowledge of present value concepts, why would insurers be willing to issue insurance to MGM under these conditions?