In: Finance
Suppose the market premium is 9%, market volatility is 30% and the risk-free rate is 3%.
Draw the Security Market Line (SML).
Discuss four (4) risks regarding alternative investments such as cryptocurrencies.
Empirically analyse the insurance sector of Zambia, and
where
possible, draw policy recommendations that could
stimulate insurancepenetration.
Parta
Part b
Risks in alternative investments are
Credit risk : alternative investments like cryptocurrency is not backed by any regulator or government in some countries which means that buyer can't be made legaly liable to pay the price of the asset he purchased.
Liquidity risk: alternative investments like properties are very illiquid your funds get blocked for a longer period of time.
Value Assement : unlike stocks and bond markets researches happen less often in these investments so it becomes quite difficult to assess the correct value for example painting's value assessment is quite a lot difficult.
Minimum fund requirements: some alternative investments are not traded in smaller multiples so they require higher amount of funds to be invested.
Non transparency of transaction costs in alternative investments markets.
Part c
Before globalisation there was s monopoly of state insurance corporation but after globalisation new players started coming into the market now there are more then 27 insurers operating in Zambia the industry has witnessed a significant growth in past couple of decades but the corresponding growth has not been seen the insurance density and specially insurance penetration which is also knows as per capita premium insurance penetration is still very low in Zambia which shows that a wide population is not covered by insurance services.The possible reasons may be
Lack of awareness in people about insurance services
Insurance services are accessible in remote areas
People don't have much faith in insurance companies with thier money.