HELP!
If the auditor of a company cannot obtain sufficient evidence to give an opinion on
whether or not the company s financial statements give a true and fair view, the
auditor should issue:
A an adverse opinion
B a disclaimer of opinion
C an unqualified opinion, but include a reference to this matter in the audit
report
D an unqualified opinion
An investor wishes to invest in a newly emerging economy through an existing fund manager. (i) Describe the restrictions that the investor is likely to want to include in the investment agreement. [5] One year after making the initial investment with the fund manager, the investor becomes concerned that the market has overpriced the emerging economy, which may lead to a significant fall in value through a market correction. (ii) Describe different strategies that could be used to protect the value of the investment. [6] (Hii) Discuss the risks inherent in each strategy. [6]The government of a country is considering whether to set up a new social security scheme following pressure from citizens. Currently there is no government social security provision at all. (i) List four possible financing methods for social security schemes. (ii) Describe how the costs of providing the social security scheme could be forecast. The government would like to limit the costs of benefits by imposing a minimum residency period of two years before citizens can access benefits. (iii) Comment on the likely consequences of such a policy.Consider a call option on a non-dividend paying stock S when the stock price is $15, the exercise price, K, is f12, the continuously compounded risk-free rate of interest is 2% per annum, the volatility is 20% per annum and the time to maturity is three months. (i) Calculate the price of the option using the Black-Scholes model. [4] (ii) Determine the (risk neutral) probability of the option expiring in the money. [1] A special option called a "digital cash-or-nothing" option has a payoff in three months' time of: 1 if ST > K 0 otherwise (iii) Calculate the price of the digital option. [2] (iv) Describe the limitations of the Black-Scholes model. [2]A health actuary is modelling the impact of a new infection which occurs in hospitals. He is studying 100 long term patients in different hospitals across a country. Infections occur according to a Poisson process, and the additional cost incurred due to an infection is a random variable, X, with mean 250 and variance 200. Based on previous infections, the health actuary believes that in all hospitals across the country, the following applies: Patient Type Proportion of patients Poisson parameter High resistance 1 in 2 0.1 Moderate resistance 1 in 3 0.3 Low resistance 1 in 6 0.9 There is no way of knowing in advance which particular patients are more resistant. For a given patient, let A, represent the Poisson parameter, and let S, represent the additional cost. (i) Explain whether this is a heterogeneous or homogeneous group of risks. [2] (ii) (a) Calculate the mean and variance of Aj. (b) State the formulae for the mean and variance of S;, conditional on A;, in terms of the moments of X. (c) Show that the unconditional mean of S, is 75, and determine the variance of S; (d) Calculate the mean and variance of the aggregate additional costs for all 100 patients. [5] In another country, a health actuary is modelling the same infection, again for 100 patients, but in a single hospital where it is believed each patient has the same level of resistance, and hence the Poisson parameter for each patient is the same. It is not known whether the Poisson parameter is 0.2 or 0.4, each being equally likely. The additional costs due to infection have the same distribution as above. (iii) Calculate the mean and variance of the aggregate additional costs. [4] (iv) Comment on your answers to parts (ii) (d) and (iii). [2]
