A fall in the Canadian-dollar price of foreign currency is
A) a loss in the relative value of the Canadian dollar.
B) an increase in the exchange rate.
C) a depreciation of the Canadian dollar.
D) an appreciation of the Canadian dollar.
E) a fall in the external value of the Canadian dollar.
3) "Foreign exchange" refers to
A) the difference between exports and imports.
B) the price at which purchases and sales of foreign goods take place.
C) the movement of goods and services from one country to another.
D) foreign currency or various claims on it.
E) the actual transaction that occurs as currencies are traded.
You are a product development actuary for an insurance company. Your company is planning to launch a new savings product, and is considering two options for developing the administration. Option A is highly automated and so more expensive to develop than Option B. However, option B will involve more manual intervention and so will be more expensive to administer. You have been asked to prepare a short presentation for the Marketing Director outlining the relative profitability of the two options. The Marketing Director has asked you to include in your presentation: . A summary of key financials for each option, including an estimate of how likely it is to produce a profit after all costs are taken into account. . An illustration of profits (after development costs) for a variety of sales levels. . An indication of how likely option A is to produce the higher profit. . A summary of other considerations that could affect the decision. Draft your presentation to the Marketing Director using 5 to 8 slides and incorporating relevant information from the profitability summary below. [60]Further Information 1. Your team has calculated the profiles of the two options as follows: Option A Option B Development cost $2.1 million E1.5. million Profit per $1000 sold E30 625 2. Policy charges will be the same under either option, and the volume sold is expected to be the same in either case. Your team has estimated the volume of sales as $100 million, but with a standard deviation of $30 million. The sales volume can be assumed to be normally distributed. 3. Your team has also informed you that: . The profit is calculated by discounting future cashflows, and allows for all sales and administration costs but ignores development costs. . There are no fixed costs apart from the development costs. They investigated the effects of running a major advertising campaign to support the product, but this would cost $3 million and would probably only increase sales by f100 million, so was not recommended.Sales of more than f140 million would put administration of the product under severe strain if option B is chosen, but there would be no problems with option A. . If there were administration problems with option B, it would take 2 months to recruit and train additional staff; and . If option A is chosen the technology developed would be reusable, reducing the cost of developing similar products in the future. 4. For the normal distribution with mean value 0 and standard deviation 1, the probability o(x) of the actual value being lower than x is shown below for various values of r: 0 0.50000 0.33 0.62930 0.67 0.74857 1 0.84135 1.33 0.90824 1.67 0.95254 0.97725
