Q. What crucial factors determine the size of margins required for pricing in insurance?

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Q. How are margins adjusted in practical scenarios for insurance pricing?

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Q. Why has the use of the second approach, involving probability distributions, increased in insurance pricing?

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Q. What is the primary consideration in deriving a suitable risk discount rate for insurance pricing models?

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Q. Why do investors demand a higher expected rate of return from risky investments compared to safe investments?

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Q. What is the concept of the "risk-free" asset in economic theory?

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Q. What is the primary purpose of the Capital Asset Pricing Model (CAPM)?

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Q. According to the CAPM, what risks are considered when determining the appropriate risk premium for investing in a life insurance company?

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Q. How does the CAPM address the risks associated with investing in individual shares?

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Q. What is a suitable proxy for representing risk-free assets in the Capital Asset Pricing Model (CAPM)?

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Q. How is risk measured in the context of the CAPM?

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Q. How does the CAPM determine the proper risk premium for a particular share?

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Q. What does the beta factor (bi) represent in the Capital Asset Pricing Model (CAPM)?

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Q. How is the expected return on an asset (Ei) calculated in the CAPM formula?

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Q. What does a beta value greater than 1 imply in the context of the CAPM?

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Q. What does the Capital Asset Pricing Model (CAPM) primarily focus on when estimating risk?

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Q. Why does the CAPM not account for specific risk in its risk estimation?

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Q. How does the availability of capital influence the shareholders' required return on capital?

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Q. Who is the final judge of what constitutes an appropriate rate of return for shareholders?

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Q. Why can't the overall rate of return from the Capital Asset Pricing Model (CAPM) be directly used as the risk discount rate in pricing models?

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