Section A (1 Mark)
An arbitrage opportunity exists if an investor can construct a __________ investment portfolio that will yield a sure profit.

Section B (2 Mark)
Money kept in current account normally earns

Section A (1 Mark)
The covariance of market's returns and stock returns is 0.005. The standard deviation of market's return is 5%.
What is the stock's beta?

Section B (2 Mark)
Actual Loss ratio is

Section B (2 Mark)
A perspective on decision making based on the assumption that people typically show risk aversion; hence, when making decisions they view whatever losses may be involved as more painful than equivalent gains are desirable. We have an irrational tendency to be less willing to gamble with profits than with losses.