1. List and discuss the intermediation functions of Banks.

2. Discuss the statement the value of an investment is not based on its expected payoff, but on the expected utility which may be yielded as a result of various payoffs.

3. Differentiate between the following down side risk categories.

   1. Semi Variance

   2. Expected lost (or expected shortfall)

   3. Probability of loss (or probability of shortfall)

   4. Tail loss and value at risk

4. State the theory of immunization and provide a scenario to explain it.

5. An insurer issues identical insurance contracts at a time 0, which terminates at time 1, to independent risk (lives). Premium income of will be received, assume payable at time 0 . Shareholders will also provide capital of 0 = ; capital provision is assumed to be a proportion of the premium income . Consider investment income of and expenses of in your analysis.

6. 1. Determine the capital remaining at the expiry of the insurance contract?

   2. What is the probability of insolvency?

   3. What is the expected return on capital to the shareholder?

   4. What is the expected cost of the insurance per unit of premium?