Explain each part.

1- The data collected for USA over the period of 1950-2010. The following equation is estimated log(Dt)=-2.88+1.06log(Y.) (0.12) (0.293) where D. is defense expenditure and Y is GDP. Standard errors are in parenthesis. Find 95% confidence interval for parameters and interpret the parameter estimates. 2-We aim to fit following model EARNINGS = B, + B,SM + BSF + B,Math + u where hourly EARNINGS is regressed on a constant, Schooling of Mother (SM), Schooling of Father (SF) and Mathematical Capability (Math). Hourly earnings are measured in dollar, SM and SF are measured in schooling year and Math is measured by exam results. Regression analysis produces following output Dependent Variable: EARNINGS Method: Least Squares Sample: 540 Included observations: 540 Variable Coefficient Std. Error t-Statistic Prob. C 14.65851 3.589279 -4.083972 0.0001 SF 0.668173 0.220817 3.025912 0.0026 SM 0.277970 0.290546 0.956715 0.3391 Math 0.458015 0.066418 6.895906 0.0000 R-squared 0.166245 Mean dependent var 19.71924 Adjusted R-squared 0.161579 S.D. dependent var 14.60151 a-Interpret the parameter estimates (considering the test statistics). b- Comment on the goodness of fit of the model. C- A researcher claims that educated man/women prefer to get married to educated women/men. Suppose this argument is empirically verified for those individuals. Reassess the estimation results in the light of this evidence. d- It is claimed that the total effects of SM and SF on earnings is 1. Explain how you can this claim. Give all the details. d- A researcher calculates parent education as SP=SM+SF. Explain what would happen if the following model is estimated. EARNINGS = B, + B,SM + B,SF + B,Math + +BSP+u (2)e. In what range must the international relative price of wheat fall? Why? 7. Suppose that: In Malaysia the unit labor requirement (ULR) to produce a pound of rice and a pencil are 2 and 4 hours of labor respectively; In Indonesia, the unit labor requirement to produce a pound of rice and a pencil are 4 and 6 hours respectively; each country has 20,000 hours of labor to allocate between the production of rice and pencils; and in autarky, Malaysia consumes 5,000 pounds of rice and 2,500 pencils. When trade PRW occurs, the world relative price of rice Pew becomes 3/5. a. Given that the marginal product of labor is the inverse of unit labor requirements, i.e. MPL = 1/ULR, derive the relationship between price ratio and the ratio of unit labor requirements. (hint: remember that w = P *MPL and that in autarky wages in both sectors are equal) b. Which country has the better technology? C. What are the autarkic (pre-trade) relative prices of rice and pencils respectively in each country? d. How many work hours are employed in the Pencil and Rice sector respectively in Malaysia? e. In which product will each country specialize? f . When specializing, how many units of rice and pencils will Malaysia produce? (hint: obtain total labor hours available from your answer in part d. above) Chapter 3: Specific Factors Model 8. How does the specific factors model differ from the Ricardian model? (list at least 3 for full points) 9. Suppose that land is specific to agriculture, capital is specific to manufacturing, and labor is mobile between sectors. If there is an increase in the amount of capital, holding the prices of agricultural and manufacturing goods constant, what happens to the equilibrium nominal wage rate and labor allocation? What happens to the rental rate of capital? What happens to the rental rate of land? 10. Suppose that land is specific to corn, capital is specific to automobiles, labor is mobile between sectors, and payments are as follows: Automobiles: Sales revenue = 400; payments to labor = 100; payments to capital = 300 Corn: Sales revenue = 300; payments to labor = 250; payments to land = 50 Holding the price of automobiles constant, suppose the increase in the price of corn is 10% and the increase in the wage is 5%. What is the impact of this on the rental of land and the rental of capital? Thought exercise: Question generation (This is due on Sunday, the gth of February, 2020 at 11:59PM) 11. Choose any topic above and construct an original multiple choice question (complete with question, at least 4 responses and the correct answer). In addition, provide the logic for what the question was designed to test.2 A life insurance company, Life Co pic, is considering buying MegaBrokers plc, a network of life insurance and general insurance brokers. Life Co will be paying for MegaBrokers with retained cash. MegaBrokers earns income through commission on the products it sells. MegaBrokers has a policy of seeking to take regular rather than upfront commission wherever possible. MegaBrokers has a significant amount of debt on its balance sheet and it has recently made a loss. MegaBrokers' board of directors rejected Life Co's initial offer and Life Co has announced publicly that it is considering whether to make a public offer for the shares of MegaBrokers, that is a hostile bid for the company. Suggest reasons for the acquisition. (b) Comment on whether these reasons are likely to be borne out in practice. [12] Describe defensive strategies that MegaBrokers could employ to prevent the acquisition. (b) Explain how these actions will affect the current shareholders of MegaBrokers. [12] (iin) Describe the factors that will affect the share prices of both Life Co and MegaBrokers during the bid period. [4] Life Co is estimating the risk-based capital of the combined enterprise. As part of the calculation it wants to allocate capital to the MegaBrokers business as well as determine the impact on the overall risk-based capital. (iv) Describe two methods for allocating the capital. Your answer should include the changes to the calculations that Life Co will need to make to incorporate the MegaBrokers' business and allocate risk capital to it. [10] Life Co plans to securitize MegaBrokers' commission income once the purchase is completed. (v) Describe how the securitisation could be structured. (b) Comment on how the securitisation could be made to be more attractive to the buyers of the security.Let X be a random variable representing the present value of the benefits of a whole of life assurance, and Y be a random variable representing the present value of the benefits of a temporary assurance with a term of a years. Both assurances have a sum assured of 1 payable at the end of the year of death and were issued to the same life aged x. (1) Describe the benefits provided by the contract which has a present value represented by the random variable X - Y. [1] (ii) Show that: cov(X, I) = ZAG - Ax And and hence or otherwise that: var(X - Y) = 'Ax -(m/4x)= _ 2Al where the functions A are determined using an interest rate of /, and functions 2 A are determined using an interest rate of i- + 2i. [7] [Total 8]Let X be a random variable representing the present value of the benefits of a whole of life assurance, and Y be a random variable representing the present value of the benefits of a temporary assurance with a term of a years. Both assurances have a sum assured of 1 payable at the end of the year of death and were issued to the same life aged x. (1) Describe the benefits provided by the contract which has a present value represented by the random variable X - Y. [1] (ii) Show that: cov(X, I) = ZAG - Ax And and hence or otherwise that: var(X - Y) = 'Ax -(m/4x)= _ 2Al where the functions A are determined using an interest rate of /, and functions 2 A are determined using an interest rate of i- + 2i. [7] [Total 8](i) List the items that should be included in a pension scheme's Statement of Funding Principles [4] Outline the measures that have been put in place to ensure that actuarial advice given as part of the statutory funding valuation can be relied upon. [5] A triennial valuation of a defined benefit pension scheme, which is closed to new members, was completed as at 1 July 2012. The results are shown in the table below: Technical provisions as at 1 July 2012 Assets Liabilities Managed Fund $165m Pensioners 160m f100m Active Members $70m Deferred Members E50m Total $225m E220m Surplus $5m Standard Contribution Rate 25% Total Pensionable Salaries E10m p.a. All pensions increase in line with Retail Price Inflation subject to a maximum of 5% per annum. When a member retires, a non-increasing pension equal to their pension at retirement is secured by purchasing an annuity from an insurer. The increases to the pension are then paid directly to the member from the scheme funds. The asset of E60m shown is therefore the value of the non-increasing pensions backed by annuities. The annual update as at 1 July 2013 is due. The main financial assumptions as at 2012 and 2013 are shown below