Private placement of equity


Question1. Carson Company is considering a private placement of equity with Secura Insurance Company.

a) Describe the interaction between Carson Company and Secura. How will Secura serve Carson’s needs, and how will Carson serve Secura’s requires?

b) Why does Carson interact with Secura Insurance Company instead of trying to acquire the funds directly from individuals who pay premiums to Secura?

c) If Secura’s investment performs well, who benefits? Is it worthwhile for Secura to closely monitor Carson Company’s management? Describe.

Question2. Assume the returns on an asset are normally distributed. Suppose the historical average annual return for the asset was 7.3 percent and the standard deviation was 8.4 percent. What is the probability that your return on this asset will be less than –4.5 percent in a given year?

Question3. What range of returns would you anticipate to see 95 percent of the time?

Question4. What range would you anticipate to see 99 percent of the time?

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Financial Accounting: Private placement of equity
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