1. Explain the purpose of insurance as a risk management tool. In homeowners insurance, how is “loss of use” calculated? How might this information factor into decisions about the policy limits you should carry?
2. You paid $1,122 for a corporate bond that has a 11.90 percent coupon rate. What is the bond’s current yield? Round the answer to two decimal places
3. Black Hill Inc. sells $100 million worth of 27-year to maturity 10.81% annual coupon bonds. The net proceeds (proceeds after floatation costs) are $975 for each $1,000 bond. What is the before-tax cost of capital for this debt financing? Round the answer to two decimal places in percentage form.