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Assignment X9

D

dan101

Member
I'm having problems with question X9.4 (ii).

The notes only give two sentences to cover "risk financing" and don't really give me much idea what's involved. So a couple of questions really:

(1) What actually is "risk financing"?

(2) What do you think this question is after? Is it things like "invest in long-term, real assets to match future liabilities"?
 
Not doing it so can't really help.

But go with your instinct. You won't be able to 'phone a friend' in the exam room. You have 2 choices: leave it out, or give it a stab. Latter is better as you should get feedback as to why you're off track (if that's the case).

Marks now don't really matter. You can have a look at the solutions when you get them. By the way you write, I'm guessing you haven't get them already
 
Risk Financing

Risk financing involves two stages:

1) working out how much a risk is going to cost your business

2) deciding how you will finance that loss

So your idea about holding matching assets is a good example of step 2.

Think about how you might finance any shortfall if the funds are inadequate.

And also talk about step 1 above - how you would estimate the cost.
 
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