Homework 3 IRM 4030: Risk Management Due: 3/12/2021 Part I. Lecture Related Works 1. The marginal tax rate of ABC Corp is specified as below: Taxable Income Tax rate $0-$5 10% $5 - $10 20% $10 - 30% A firm has its taxable income as the following: Probability Pre-tax income $20m 0.9 $50m (1) Assume the company could purchase a zero-loading insurance policy. What is the premium of the insurance policy? (2) Continue to assume the policy to have a zero loading. How much tax saving will ABC Corp have by purchasing the insurance policy? (3) Answer (1) and (2) assuming the insurance policy has a 25% loading. 0.1 Homework 3 IRM 4030: Risk Management Due: 3/12/2021 Part I. Lecture Related Works 1. The marginal tax rate of ABC Corp is specified as below: Taxable Income Tax rate $0-$5 10% $5 - $10 20% $10 - 30% A firm has its taxable income as the following: Probability Pre-tax income $20m 0.9 $50m (1) Assume the company could purchase a zero-loading insurance policy. What is the premium of the insurance policy? (2) Continue to assume the policy to have a zero loading. How much tax saving will ABC Corp have by purchasing the insurance policy? (3) Answer (1) and (2) assuming the insurance policy has a 25% loading. 0.1