Answer the following questions appropriately.

In each of the following cases, state whether the money supply will increase, decrease or be unaffected: (i) an increase in the public sector deficit financed by borrowing from the non-bank private sector [1] (ii) a decrease in the non-bank private sector's holdings of cash [1] (iii) an increase in the commercial banks* liquidity ratios [1] (iv) the sale of foreign currency by the central bank. [1] [Total 4]A life insurance company issues a 20-year with-profit endowment assurance policy to Russell, aged 40. The sum assured of $20,000 plus declared reversionary bonuses is payable immediately on death, or on survival to the end of the term. (i) Calculate the quarterly premium payable by Russell throughout the term of the policy if the office assumes that future reversionary bonuses will be declared at the rate of 1.92308% of the sum assured, compounded and vesting at the end of each policy year on the following basis: Mortality: AM92 Select Interest: 6% pa Initial expenses: 114% of the first premium and 2.5% of the basic sum assured Renewal expenses: 4% of each quarterly premium, excluding the first [8] (ii) The life office values its with-profit business using the net premium method, assuming an interest rate of 4% pa and AM92 Ultimate mortality. Calculate the prospective reserve for Russell's contract described above just before the 13th quarterly premium is payable, given that the total reversionary bonus declared up to that time is $600. [5] [Total 13]