1. Policy provisions relating to "scheduled premiums," "unscheduled premiums" and the "applicable percentage" are included in
cash value whole life policies.
variable life insurance policies.
the guaranteed insurability option.
universal life policies.
2. Octane Music currently has $40 million of debt at 9 percent interest rate. Its stock price is $40 per share with 4 million shares outstanding. Octane is a zero-growth firm. The company's EBIT is $29.866 million, tax rate is 40 percent, market risk premium is 5 percent, risk free interest rate is 6 percent. Octane is considering increasing its debt ratio to 40 percent (based on market values) and buying back some shares with the extra borrowed funds. Interest rate on the new debt will be 10 percent. Octane's beta is currently 2.0. Calculate Octane's unlevered beta (please use market value debt-to-equity ratio)
Calculate Octane's new beta (levered beta) with 40 percent debt ratio
A. 0.87
B. 1.21
C. 1.60
D. 2.24
E. None of the above