1. Imagine a terror-related event: If you are an airline company, hedging against the revenue loss that would be associated with, say, a one-week suspension of all US-based flights, describe a derivatives trade that you would recommend and give a brief justification.
2. The Even Cut Co. is considering opening a new plant to produce lawn mowers. The initial cost of the project is $6 million. This cost will be depreciated straight-line to a zero book value over the 15-year life of the project. The net income of the project is expected to be $137,000 a year for the first four years and $538,000 for years 5 through 15, respectively. What is the average accounting return on this project?