Please do me correct workings.

1. (i) State four methods by which the government could have a role in the

provision of retirement benefits. [2]

The government of a developed country requires all employees of private sector

companies to enrol in a defined contribution (DC) pension arrangement provided by

their employers and which meets the government's criteria.

The criteria include:

All employees must take benefits at age 65.

At retirement an individual's accumulated fund must be used to purchase an

inflation-linked annuity, which includes a 50% spouse's reversionary pension.

The government is proposing to remove these two criteria, instead allowing all

employees to receive their benefits any time after they reach 55, and use the

accumulated fund however they wish.

(ii) Suggest reasons for the government's proposal. [3]

(iii) Set out the advantages and disadvantages of removing the criteria for:

(a) employers.

(b) employees.

(c) annuity providers.

[6]

A recent national survey found that 95% of the members of these arrangements have

their pension assets invested in lifestyling funds which are structured to target annuity

purchase at age 65.

(iv) Discuss the issues that the providers of the lifestyling funds will need to

consider if the criteria are to be removed. [9]

2.

In a market where the assumptions of the Capital Asset Pricing Model (CAPM) hold, there are a risk-free asset and two risky assets with the following attributes: Rate of return (per annum) State Probability Asset 1 Asset 2 Asset 3 0.2 5.0% 15.0% 26.0% 03 5.0% 22.0% 15.0% AWN- 0.1 5.0% 10.0% 24.0% 0.4 5.0% 28.0% 7.0% Market capitalisation 30,000 70,000 (i) Determine the composition of the market portfolio. [1] (ii) Determine the market price of risk. [5] (iii) Calculate the beta of each risky asset. [2] (iv) State the limitations of the CAPM. [3] [Total 1 1] (i) Define the three forms of the Efficient Markets Hypothesis. [3] (ii) State two reasons why it is hard to test whether any of the three forms hold in practice. [2] [Total 5]Claims on a portfolio of insurance policies arrive as a Poisson process with parameter 2, claim amounts having a Normal distribution with mean u and variance o', and there is a loading 0 on premiums. The insurance company has an initial surplus of U. (i) Explain carefully the meaning of P(U), P(U,) and (U, 1). [3] (ii) State four factors that affect the size of P(U,), for a given t. [2] (iii) Explain, for each factor, what happens to "P(U.) when the factor increases. [4] Sarah, the insurance company's actuary, prefers to consider the probability of ruin in discrete rather than continuous time. (iv) Explain an advantage and disadvantage of Sarah's approach. [2]