Describe approaches which can be adopted by multinational companies to minimisecorporation tax charges. [6]

(i) State the main uses of financial futures. [4]

(ii) Describe the role of margin within a futures contract. [3]

A coffee producer has negotiated a contract to sell 1,000 tonnes of coffee in two months' time at the then current market price.

The current market information is:

Current spot price of coffee 100 per tonne Futures price for delivery in 1 month 95 per tonne

Futures price for delivery in 2 months 92 per tonneEach futures contract is for delivery of 10 tonnes of coffee.

(iii) Calculate how the producer could hedge its exposure using these futures. [2]

The spot price in two months' time turns out to be 103 per tonne.

(iv) Determine the cashflows that the producer would experience if the futures

contracts in part (iii) are held to expiry. [3]

An pensionist to a very large defined benefit pension scheme has undertaken a review ofthe mortality experience of the pensioner members over the previous year. A scheme

manager has suggested that the mortality assumption for the forthcoming actuarial

valuation should be set in accordance with the crude rates underlying this experience.

(i) Outline the reasons why this may not be a suitable proposal. [4]

(ii) Suggest how the proposal could be adapted to provide a more reliable

mortality assumption. [6]

A journalist has just been appointed as a foreign correspondent covering news stories in three island countries Atlantis, Beachy and Coral. He will spend each day in the country likely to have the most exciting news, taking the flights available between each country which go once per day at the end of the day. The previous foreign correspondent tells him "If you want to know how many flights you are likely to take, I estimate my movements have been like this" and she drew this diagram showing the transition probabilities: 0.6 0.2 0.6 Atlantis Beachy 0.25 0.15 0.4 Coral 0.5 (i) Give the transition matrix for this process. [1] On his first day in the job the new foreign correspondent will be in Atlantis. (ii) Calculate the probability that the foreign correspondent will be in each country in his third day in the job. [2] The previous correspondent also reported that Beachy must be the most interesting of the islands in terms of news because she spent 41.9% of her time there compared with 32.6% on Atlantis and 25.6% on Coral. (iii) Sketch a graph showing the probability that the journalist is in each country over time, using the information above. [3] (iv) Calculate the proportion of days on which the foreign correspondent will take a flight. [1] The first time the foreign correspondent visits each of the countries he takes a photograph to mark the occasion. (v) Identify a suitable state space for modelling as a Markov chain which countries he has visited so far. [2] (vi) Draw a transition diagram for the possible transitions between these states. [3]The government statistical service in a country with a population of 10 million has estimated mortality rates among males in that country aged 20 to 99 years inclusive. It wishes to create a new standard mortality table. (i) Describe why the crude mortality rates should be graduated during the production of this standard mortality table. [3] (ii) Describe a suitable method of graduation for these mortality rates. [1] (iii) Explain the limitations of the method described in your answer to part (ii) in this situation. [2] The government performs the graduation and compares the crude and graduated rates. Below are some of the results of the comparison: Value of individual standardised Number of ages deviation at age x, Ex 3, z,2-3 -1>z, 2-2 16 0>z,2-1 26 1>z, 20 2>z, 21 10 3>z,22 2 1 23 (iv) Assess the quality of the graduated rates for use as a new standard mortality table by applying TWO statistical tests to the above information. The two tests should each examine a different aspect of the graduation. [6] (v) Comment on the implications of your results in part (iv) for the government using the new standard mortality table for economic and financial planning purposes. [21