Question: 1. What is duration? Why is it important? 2. During the 1999's The Financia Services Modernization Act of 1999 was enacted. What did this law

1. What is duration? Why is it important?

2. During the 1999's The Financia Services Modernization Act of 1999 was enacted. What did this law do? What were some of the consequences for the US banking system?

3. What are three key activity areas for securities firms?

4. What is negative externality? In what ways do the existence of negative externalities justify the extra regulatory attention received by financial institutions?

5.a. Suppose a 65-year-old person wants to purchase an annuity from an insurance company that would pay $20,000 per year until the end of that person's life. The insurance company expects this person to live for 15 more years and would be willing to pay 6 percent on the annuity. How much should the insurance company ask this person to pay for the annuity?

b. A second 65-year-old person wants the same $20,000 annuity, but this person is much healthier and is expected to live for 20 years. If the same 6 percent interest rate applies, how much should this healthier person be charged for the annuity?

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