A large bakery buys a flour mill.

Which form of integration is this?

A conglomerate

B horizontal

C vertical backwards

D vertical forwards

3 In the Wilkie stochastic investment model, the force of inflation from f - 1 to t, I(t), is modelled as I(t) = QMU + QA[I(t -1) - OMU] + OSD . QZ(t) where QZ(1) ~ N(0, 1) and OMU. QA and OSD are fixed parameters. The parameter values recommended by Wilkie in his 1995 paper based on historic data are: QMU = 0.047 QA = 0.58 QSD = 0.0425 (1) Calculate, given that the annual rate of inflation is 2.5%, the 95% confidence interval for the rate of inflation over the following year. [4] (ii) Comment on the result in (i). [2]State what is meant by put-call parity. Discuss the following statement: The existence of fund managers who sell their services based on their alleged ability to select over-performing sectors and stocks and so add value to portfolios demonstrates that capital markets are not efficient. (i) Explain the following terms (stating any assumptions needed) in the context of mean-variance portfolio theory: (a) opportunity set (b) efficient frontier for a portfolio of risky assets (c) indifference curves (d) optimal portfolio Explain what the Separation Theorem implies about optimal investment strategies. Explain the four axioms that are required to derive the expected utility theorem.Describe systematic and specific risks and returns. [3] (ii) Explain how the risks of a portfolio can be reduced by diversification, without impacting on expected return. (ii) Explain how an investor's economic characteristics will affect his choice of an investment that: {a} first order stochastically dominates another {b} second order stochasticaliy dominates another