Walther owns a home in flood-prone Paradise Basin. If there is no flood the home and land together will be worth $2100. If there is a flood, Walther's home will be destroyed but the land will still be worth $800. There is 1/10 of chance that Walther's house will be destroyed by the flood. Walther can buy flood insurance for $0.2 per dollar of coverage. Let CF and CNF be the value of respective values of his land in the case of a flood or no flood. Suppose the equation CNF = a - CF/b represents the possible values of CNF and CF that Walther can achieve by buying some amount of insurance. What is the value a +b?

Which of the following statements is correct? a. the managers of established, stable companies sometimes attempt to get their state legislatures to remove rules that make it more difficult for raiders to succeed with hostile takeovers. b. hostile takeovers are most likely to occur when a firm's stock is selling below its intrinsic value as a result of poor management. c. stockholders in general would be better off if managers never disclosed favorable events and therefore caused the price of the firm's stock to sell at a price below its intrinsic value. d. the efficiency of the u.s. economy would probably be increased if hostile takeovers were absolutely forbidden. e. in general, it is more in bondholders' interests than stockholders' interests for a firm to shift its investment focus away from safe, stable investments and into risky investments, especially those that primarily involve research and development. icon key question 6 of 10 b multiple choice 01-060