Ch 30: Investment

Question 1

Principle of investment

Answer 1

Company should invest so as to maximise the overall return on the assets, subject to the risk being taken on being within the financial resources available to it.

Question 2

Investment regulations

Answer 2

• Restrictions in types of assets allowed to be invested in
• restrictions on the amount of any particular asset type that can be taken int account for the purposes of demonstrating solvency
• Restriction son maximum exposure to a single counterparty/country
• Requirement to hold certain proportion of total assets in a particular class - such as a government stock
• Requirement to match assets and liabilities by currency
• Requirement to hold mismatching reserve
• Limit on extent of mismatching allowed
• Restrictions on valuation methods
• Custodianship of assets - restrictions on who are permitted to look after them.