List the steps involved in the process of conventional asset liability modelling.

(ii) Outline the inputs to the model and the considerations to be taken into account when choosing the inputs.

Describe the six limitations of the theory of comparative advantage. Describe the five causes of balance of payments deficits in developing countries? With reference to the theory of production, discuss five factors in detail that could potentially lead to; . Increasing returns to scale. . Decreasing returns to scale. Describe at lease five limitations of the cardinal approach to the theory of consumer. Describe reasons why the demand curve slopes downwards. Explain in detail the difference real and precuniary economies of scale of a firm.Describe four ways in which progressive tax may be justified. Describe at least six factors that determine the elasticity of supply. Describe at least five factors (use diagrams where necessary ) that may account for an outward shift in the demand curve. Describe five monetary measures that can be taken to reduce inflation in a country.7 An investor can invest in two assets A and B. A B expected return 6% 8% variance 4%% 25%% The correlation coefficient of the rate of return of the two assets is denoted by p and is assumed to take the value 0.5. The investor is assumed to have expected utility functions of the form E(U) = E(r ) -a Var(r ) where a is a positive constant and r, is the rate of return on the assets held by the investor. (1) Determine, as a function of o, the portfolio that maximises the investor's expected utility. [8]