Answer all it's microeconomics model

Question 1

Example 9.4.1. A life office issues a three-year non-profit endowment assurance policy to a man aged 30. The sum assured is f60.000 on maturity or at the end of the year of earlier death. Level premiums of f 19.000 are payable annually in advance. The office maintains reserves as follows: reserve at end policy year of policy year L19.000 138.000 The office expects that its life funds will earn interest at 7% p.a. over the next 3 years. The office expects expenses to be as follows: initial expenses: 10% of the first year's premium, renewal expenses: 2% of later premiums. Mortality is expected to follow A1967-70 ultimate. Calculate (i) the profit signature; (ii) the net present value at the issue date of the profit to the office, using a risk discount rate of 10% p.A.Mrs E C Mist runs a bookshop. In the last year her accountant calculated Mrs Mist's profit by comparing her revenue with her expenditure on staff wages, depreciation, overdraft interest, rent, and the cost of the books sold. The resulting figure was $60,000 which her accountant calls 'profit'. Her accountant congratulates Mrs Mist on running such a profitable business. However, Mrs Mist sees things slightly differently. She estimates that: she could have earned $58,000 as a pensions actuary if she had not been running the bookshop the $30,000 of her own money that she put into the business would have earned $2,500 in interest if she had left it in her bank account. (Arguably, we should really consider the investment return that would have been earned on an investment with a similar level of risk to the book shop.) (i) State which costs are (a) explicit and (b) implicit. (ii) State Mrs Mist's normal profit. iii) Determine the economic profit that Mrs Mist made last year.(iv) Assuming she can sell the bookshop business for $30,000, state what your answer suggests Mrs Mist should do next year. In the next year, Mrs Mist again runs the bookshop and her accountant calculates the accounting profits as being $80,000. (v) Assuming that her actuarial salary would have been $63,000 and her initial $30,000 investment in the business would have earned $2,800. Suggest how Mrs Mist will view this