From previous experience the principal has determined the following: LOW EFFORT HIGH EFFORT
Sales Probability Sales Probability
$ 450 0.25 $ 450 0.50
$ 200 0.25 $ 200 0.25
$ 100 0.50 $ 100 0.25
(i) Design a contract that eliminates the need for monitoring and eliminates the moral
hazard problem.
(ii) Explain the ‘moral hazard problem’ in this context.
(iii) Using the values from your contract, explain how the contract has solved the moral
hazard problem.

In a fixed-term, level-payment reverse mortgage, sometimes called a reverse annuity mortgage, or ram, a lender agrees to pay the homeowner a monthly payment, or annuity, and expects to be repaid from the homeowner’s equity when he or she sells the home or obtains other financing to pay off the ram. consider a household that owns a $150,000 home free and clear of mortgage debt. the ram lender agrees to a $100,000 ram for 10 years at 6 percent. assume payments are made annually, at the beginning of each year to the homeowner. calculate the annual payment on the ram.

Review the key ethical and social issues over the last five decades and place each on the timeline in chronological order. note that once you complete this part of the question, you will be unable to adjust your answers.

Imprudential, inc., has an unfunded pension liability of $572 million that must be paid in 25 years. to assess the value of the firm’s stock, financial analysts want to discount this liability back to the present. if the relevant discount rate is 6.5 percent, what is the present value of this liability? (do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89)