) The supply curve for Japanese yen on the foreign-exchange market is upward-sloping when

plotted against the exchange rate (measured as the Canadian dollar price of one Japanese yen)

because

A) when the dollar depreciates, Canadian goods are cheaper in Japan, and more Canadian

exports are therefore demanded.

B) a depreciation of the dollar will cause the yen prices of Canadian imports to rise.

C) when the dollar depreciates, the price of Japanese exports to Canada decreases.

D) an appreciation of the dollar will cause the yen prices of Canadian exports to fall.

E) when the dollar appreciates, Canadian goods are cheaper in Japan.

A general insurance company specialises in underwriting property and liability risks for factories. The company is assessing the renewal premium for a large chemical factory that switched its main product from Chemical Y to Chemical X two years ago. The insurer wishes to use the factory's loss history prior to the switch, so it proposes to adjust previous loss data and use a credibility approach to determine the new risk premium. The underwriter has a prior belief that the total cost of claims per unit turnover under Chemical X will be half of that under Chemical Y. The table below gives the turnover of the factory, which is used as the overall exposure measure, and the actual and adjusted loss data. All amounts have been adjusted onto policy year 8 terms and monetary values. Ultimate loss ([) per 1000 turnover Chemical X. Turnover Chemical prior Chemical Policy Year (EO00) Y. actual (50% of Y) X. actual 5,033 32 16 5,234 34 17 5.444 *7 41 6,123 38 19 6.368 48 24 6.623 35 6,888 38 (estimate) 9,000Let: "X prior" and "X: actual" be denoted Risk I and Risk 2 respectively. the turnover in t000 for Risk / in year k be V;- the loss per 1000 turnover for Risk / in year & be X, (1) Specify the Buhlmann-Straub model that could be used to estimate the year 8 loss experience for the factory, stating the underlying assumptions. [5] In the Buhlmann-Straub model: the long-run (hypothetical) losses per 1000 turnover can be estimated as the mean of all losses per 1000 turnover, X . the expected variance of losses per t000 turnover can be estimated as EEVA (XA - X. ) E (N - 1)the variance of the hypothetical mean losses per 1000 turnover can be estimated as EV(x-X) -(R-1)ip where . N, is the number of years of data for Risk / . R is the number of risks The following calculations are available. Risk I Risk 2 Both risks 23.4692 36.5294 27.6994 2.297,024 30,388 (ii) Derive the estimated losses from policy year 8. [7]