What are the most pressing issues with regard to economics.

Why does economics use assumptions

(4 points) You are applying the Target Total Rate of Return Model and are given the following information: The risk-free rate is 2%. The insurer's beta is 1.5. The market risk premium is 6%. Premiums are 850,000. Equity is 500,000. Investable assets are 1,200,000. The insurer's investment return is 7%. (a) (/ point) Calculate the target total rate of return using the Capital Asset Pricing Model (CAPM). (b) (1.5 points) Calculate the underwriting profit margin. (c) (/ point) Explain how the existence of catastrophe risk makes the use of CAPM problematic for insurers. (d) (0.5 points) Explain the relationship between the internal rate of return and net present value when employing discounted cash flow analysis.Describe the major achievements of Adam Smith. Discuss the main schools of thought. Describe what economists mean when they say that prices are sticky. There are an increasing number of international initiatives and forecast work pushing and prodding governments in the direction of adopting public management systems geared toward reform and, above all, results. What are they? The goal of eradicating extreme poverty and hunger has two targets and 5 indicators. Describe them. Discuss the comprehensive development framework. There is power of measuring results. Discuss. The OECD (2002a) defines monitoring and evaluation as what?(7 points) You have been provided with historical prices for $ large-cap stocks in the US over a long period of time from f to /2 - (a) (2 points) List all steps necessary to compute the related principal components. Your analyst provides the following additional information about the covariance matrix of daily returns (which are assumed to follow a stationary process) across the 5 stocks: Eigenvalues 0.001853 0.00053 0.000221 0.000121 0.000109 Eigenvectors W1 W2 W3 WA -0.142 -0.480 -0.586 0.630 -0.098 -0.964 0.261 0.030 0.003 -0.049 -0.105 -0.389 -0.414 -0.754 -0.313 -0.132 -0.305 -0.060 -0.175 0.925 -0.151 -0.676 0.694 0.067 -0.187 (b) (/ point) Determine the fewest number of principal components needed to explain at least 80% of the variation. (c) (3 points) Calculate the correlation between the returns of the first and fifth stocks using the first 3 principal components. Assume that data is missing for the first stock prior to 4. (d) (/ point) Describe how the principal components analysis on the 5 stocks between & and /2 can be used to generate price data for the first stock prior to 4 (assuming returns follow a stationary process)