A) If the bank you manage has no excess reserves and a sound customer comes in asking for a loan, should you automatically turn the customer down, explaining that you dont have any excess reserves to loan out? Why or why not? What options are available for you to provide the funds your customer needs? (4 marks)

B. Why are more funds from property and casualty insurance companies than funds from life insurance companies invested in the money markets? (2 marks)

C. Identify the cash flows available to an investor in stock. How reliably can these cash flows be estimated? Compare the problem of estimating stock cash flows to estimating bond cash flows. Which security would you predict to be more volatile? (4 marks)

D. Foreign exchange rates, like stock prices, should follow a random walk. Is this statement true, false, or uncertain? Explain your answer. (3 marks)

E. Human fear is the source of stock market crashes, so these crashes indicate that expectations in the stock market cannot be optimal. Is this statement true, false, or uncertain? Explain your answer. (3 marks)