Answer the following questions precisely explaining the answers.

1, Explain the transaction cost approach to explaining the external growth of the firm via a merger or a strategic alliance.

A Poisson process is being used to model the number of "hits" that will be received by a new website. Data from other web sites suggest that hits will be received at a rate of 2 per second. (i) Describe how you would simulate the process. [3] (ii) Describe how you would verify the model when the new website is "live". [2] [Total 5]An insurer has initial capital of # and receives premium income continuously at the rate of c per annum. Let S() denote the total claim amount up to time /. (i) Describe a model that would allow the insurer to estimate its probability of ruin (ie the probability that its claims outgo is more than its available funds). State any assumptions that you make. [3] (ii) Write down an expression for the probability of ruin in terms of u , c and S(). [1] [Total 4]