QUESTION 1                                                                                        3 marks

  1. Discuss the PRIMARY objective of the Insurance Authority of UAE. 1 mark
  2. Finance classifies insurance industry as one of the financial institutions. List four (4) economic sectors that finance classifies as Financial Institutions in UAE.                                                                                           1 mark
  1. From the four listed economic sectors as financial institutions in ii above, identify one sector that has the largest value of assets and liabilities (in Dirham), and explain why that sector has the largest value of assets and liabilities in Dirham?                                                                              1 mark

QUESTION 2                                                                                        4 marks

  1. Discuss the PRIMARY benefit of having an insurance program policy in a company.                                                                                       1 mark
  2. Discuss the MAJOR cost of having an insurance program policy in a company.                                                                                   1 mark
  1. Discuss the benefits and the concept of large numbers in insurance industry.                                                                                                1 mark
  2. Based on Cost/benefit analysis concept, do the benefits of an insurance program policy justify the insurance cost? If yes, please explain, why and if no, please explain why.                                                                   1 mark

QUESTION 3                                                                                                   5 marks


  1. Show and name the formula used to calculate percentages in the last column “Change (%)” in the Table above.                            1 mark
  1. What does the performance of DFM Index represent in UAE? 1 mark
  1. Draw a line graph showing the DFM Index movements for the month of October 2019.                                                                        1 mark
  1. Based on the line graph drawn in III above explain whether the DFM Index performance is positive, negative or stable and discuss the implications of the DFM index movements on the UAE economy performance.                                                                                        1 mark
  1. What is the numerical beta of DFM index? Also explain why? 1 mark

Question 4                                                                                        2 marks

What do the following two statements mean and discuss the difference between them?

  1. The returns of two stocks are Perfectly Positively Correlated.1 mark
  1. The returns of two stocks are Perfectly Correlated.                       1 mark

Question 5                                                                                        3 marks

  1. What does diversifying company investments mean?                      1 mark
  1. Does making two (2) investments in: 1. Hilton Hotel and 2. Mangrove Hotel, help a company to diversify its investments? If YES, why? If NO why?                                                                                            2 marks

Question 6                                                                                        3 marks

  1. What do you understand by the term ‘Standard Deviation’?    1 mark
  1. Discuss whether investing in a well-diversified portfolio eliminates TOTAL risk or not? Hint: First, define TOTAL risk.                       2 marks  


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