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Risk Management(Buss 043) Question Paper

Risk Management(Buss 043) 

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2012



TIME: 2 HOURS

INSTRUCTIONS
Answer question one (compulsory) and any other two questions.

Question One
A Company needs to borrow 10 million in six months time for a period of 2 years. Current rates are 30% per year. The manager does not wish to pay an interest rate higher than this. He is considering using different alternatives.
For each of the following four alternatives, briefly explain how each could be useful to the manager.
Forward rate agreement.
(4 Marks)
Interest rate swaps.
(4 Marks)
Interest rate futures
(4 Marks)
Interest rate options.
(4 Marks)
Write short notes on:-
Subjective probability and objectives probability.
(5 Marks)
Types of hazards.
(5 Marks)
Speculative risk.
(4 Marks)

Question Two
Discuss the main features of proposal form.
(8 marks)
Discuss the following issues in insurances:-
Supervision of insurance.
(6 Marks)
Commercial insurance.
(6 Marks)

Question Three
Insurance provides several benefits to individuals’ government and society at large. Explain these benefits.
(12 Marks)

With the use of appropriate examples explain the various sources of pure risk.
(4 marks)

Explain the characteristics that distinguish insurance contract from other contracts.
(4 Marks)

Question Four
Explain the following concepts:
Homogenous exposure.
(5 Marks)
Law of large numbers.
(5 Marks)

Discuss two risk management strategies.
(10 marks)

Question Five
Discuss the concept of captive insurance giving examples. (20 marks)






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