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1.Supposes a Consumer has a wealth of $10,000. There is a probability of 0.1 that all but $1 000 will be lost. Her utility function

1.Supposes a Consumer has a wealth of $10,000. There is a probability of 0.1 that all but $1 000 will be lost. Her utility function over wealth is given by U(w) = w 1 2 . Suppose an insurance company offers insurance against loss of wealth. What is the maximum expected revenue the insurance company can earn from this customer?

2. As an employee of a financial-services firm, Elise helps her clients reduce their debt, build their wealth, and save for their retirement. Which certification is Elise mostly likely to need to perform her job:

3.Troy is a finance manager for a small firm in town. Last night, he attended a cookout at his neighbor's house, and met Melissa, who is the owner of a large financial-planning company. Troy and Melissa exchanged business cards, and they set up an appointment for the following week to discuss business opportunities. In what type of situation did Troy and Melissa form a professional business relationship?

4.How do ethics relate to risk management?

5.To reduce the risk of loss due to fire or power outages, a financial business should protect its computer data by

6.One way for a company to manage its risk in relation to its employees' workplace behavior is by

7.When businesses continuously monitor the laws and implement changes to remain in compliance, they are

8. Why is the choice of a risk measure for internal and external risk of great practical importance?

9.The management function of business is usually responsible for

10. Limited liability is a characteristic of what form of business ownership?

11.An important purpose of full-disclosure laws and regulations is to

12.What effect do some environmental laws have on businesses?

13.Detail one set of assumptions that imply that the CAPM holds and show how the CAPM result follows from these assumptions.

14.Show the Black-Scholes formula for the price of a call option on a non-dividend paying stock. Explain what each symbol in the formula means and how the variable that it represents affects the option price.

15.'Explain how the formula can be modified to give the value of an option on a stock paying a continuous dividend

16.Give some examples of how option pricing can be applied in corporate finance.

17.Explain the difference between a forward contract and a futures contract.

18.Use the Rational Expectations approach to derive an expression for the futures price of a cash flow with payoff xt+T at time t + T .

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