MASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2017/2018 FOURTH YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF BACHELOR OF SCIENCE IN ACTUARIAL SCIENCE WITH INFORMATION TECHNOLOGY MAIN CAMPUS MAC 407: PRINCIPLES OF FINANCIAL MANAGEMENT Date: 16" February, 2018 ‘Time: 12.00 - 3.00 pm INSTRUCTIONS: « Answer question ONE and any other TWO questions MASENO UNIVERSITY ISO 9001:2008 CERTIFIED SoMAC 407: PRINCIPLES OF FINANCIAL MANAGEMENT QUESTION ONE (COMPULSORY, 30 MARKS) (a) Explain the concepts:- (i) Financial leverage (ii) Term structure of interest rate Profitability index (iv) Liquidation value (iii [5 marks} (b) (i) Give and explain three methods for computing interest. [3 marks} (ii) Use the percent of sales method to prepare a proforma income state- ment for compony A. Projected sales for the following year equal ~ 4 million dollars. Cost of goods sold“equals 70% of sales; &dminis- trative expense equals 500000 dollars and depreciation expense is 300000 dollars: Interest expense equals 50000 dollars and income is taxed at a rate of 40%. The firm plans to spend 200000 dollars during the period to renovate its office facility and will retire 150000 dollars in notes payable. Finally, selling expense equals 5% of sales. ) ) (v) Line item budget ) ) [5 marks) (c) Explain the concepts:- (i) Cashflow statement (ii) Expost budget (iii) Intrinsic value _ _ i : (iv) Sinking fund provision [5 marks} (v) Operating leverage (i) Prepare and explain a dummy cash-budget indicating tri of the budget. (ii) Explain the concept accounting rate of return. (e) (i) Suppose an investor had a bond with an 8% coupon interest rate, a par value of 100000 dollars and « market price of 70000 dollars. (2 mar Obtain the current yield of the bond, resent Value of the following project using dis: n the result (3 marks} icky areas [5 marks} [2 marks} (4) (ji) Calculate the Net P: count rate of 10%, Comment 0} 1Year 0 Outflow/Inflow $ (5000) Year 1 Outflow/Infiow 2000 Year 2. Outflow/Inftow 2200 Year 3. Outflow/Inflow 1300 _/ QUESTION TWO (20 MARKS) (@) (@ Give and explain five main annual financial statements, {5 marks} Gi) Explain what is meant by the principal budget factor and why is it important in budgeting? [5 marks} (>) G@) A company is planning to invest in a security that has several pos sible rates of return. Given_the following probability distribution of returns, what is the expected rate of return on the investment? Compute the standard deviation of the returns. Explain the mean- ~ — __ ing-of the resulting numbers. _ a [6 marks} (i) At an anmual rate of compounding at 9%, how long does it take for a given sum to become double and triple its original value? _ ce ae oa = _— Pmardl STION THREE (20 MARKS) (2) (i) Give and explain four characteristics of a good tax system. [4 marks} (ii) An investor wants to analyse the capital structure of a company. He has the following information. re(b) Year Long-term debt (11%) Preferred stock (10%) Common stock (Par $ 10) Capital surplus Retained earnings Dividend paid 2000 ©2005 12.27 9.46 0.13 0.13 0.01 0.14 5.67 6.35 33.93 60.31 3.005 3.684 2008 11.19 0:12 12.6 6.19 125.2 10.08 The present price of the share in Nairobi stock market is $450. ‘There is a rumour in the market that the ABC company may issue shares shortly. The investor wants the answers for the following:- 1. Is there any ground for such rumour? IL. Is the capital structure sound? IIL Is it proper to purchase the shares?” Analyse the given data and advise the investor. [6 marks} () Give and explain two constraints which interfere with business firms in their efforts to achieve the principal objective of maximizing profits. [2. marks} (i) A company had sales of 2 million dollars during the current year. million dollars and its operating Interest expenses on outstanding It’s cost of goods sold was 1.2 expenses were 400000 dollars. debts were 100000 dollars and th: preferred stock dividends. The c preferred stock dividends and int e company paid 40000 dollars on ompany received 10000 dollars on erest income of 12000 dollars. The company sold-stock that-had beon- owned for-2 years-for 40000 dollars, the original cost of the stock was 30000 dollars, Determine the company’s taxable income and its tax liability. Rates for tax liability Amount (in dollars) 15% 25% 34% Surtax of 5% on 2250. have either:- I. too much cash or IL. too little cash in its asset 50000 25000 250000 [4 marks}composition relative to its cash requirements Apmarks] QUESTION FOUR (a) (i) Explain to what extent can accounting flow, in particular depreci- ation provision provide finance for an economic entity. (2 marks} (ii) You are provided with the following data about a company:- Number of issued ordinary shares equals“250000 I. Market price per ordinary shares ‘equals $ 25. IIL Total earnings for the year equals 500000 dollars before tax. IV. Rate of corporate tax equals 50%. —V. The total ordinary dividend will be equal to 25% of the earn ings for the year after tax. VI. Preference dividend will be 30000 dollars. From the above information compute:- 1. Earnings per share Il. Dividend yield III. Earnings yield IV. Dividend cover V. Price earnings ratio [5 marks} (iii) Explain the following concepts:- I. Amortization = Il. Book value = — 7 = - - IIL. Indenture~ [3 marks} (b) A Explain why we need to practice financial management. [6 marks} IL. Give and explain four factors which influence the profits made by a business organization during a particular trading period. [4 marks} QUESTION FIVE (2) (i) Give and explain two methods used for measuring cashflows. [2 marks} (ii) A company’s sales for the year 2016 were 240000 dollars and its op- erating costs amounted to 228000 dollars. During the same period, the company’s operating assets averaged 80000 dollars. Compute:, 4IIL. . Profit margin - Explain why industries with high turnover have low profit {1 mark] [1 mark] [1 mark] Turnover ratio Return on assets for the company margins, while those with low turnover have high profit mar- gins. (2 marks] . In a business firm, it is generally desirable to maximize profits and maintain a favourable liquidity position at the same time. Sometimes those two requirements may be mutually exclusive. Give a few occasions when a favourable result in one of the requirements adversely affects the other. [5 marks] - You are considering a project that will require an initial outlay of 54200 dollars. This project has an expected life of 5 years and will generate after-tax cashflow to the company as a whole of 20608 dollars at the end of each year over its 5 year life. In addition to the 20608 dollars cashflow from operations during the 5th and final year, there will be an additional cash-inflow of 13200 dollars at the end of the 5th year associated with salvage value of the machine, making the cashflow in year 5 equal to 33808 dollars. Therefore, the cashflows associated with this project appear in this schedule below:- Cashflow Initial Outflow $54200 Initial Year 1 20608 -— Initial Year 2 -20608 ~ - —_ Initial Year 3. 20608 Initial Year 4 20608 Initial Year 5 33808 Given a required rate of return of 15%, calculate the following:- I. Payback period [2 marks] Il. NPV [2 marks] II, Profitability index (2 marks] Explain the concept cash budget. [3 marks]iT p0021 [out 7 AZERE SAV Q SER (e =) MASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2016/2017 FOURTH YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF BACHELOR OF SCIENCE IN ACTUARIAL SCIENCE WITH INFORMATION TECHNOLOGY MAIN CAMPUS MAC 407: PRINCIPLES OF FINANCIAL MANAGEMENT Ds Date: 30" November, 2016 Time: 12.00 - 3.00 pm nse INSTRUCTIONS: or 19199 e Answer question ONE and any other TWO questions. ¢ Observe further instructions on the answer booklet. MASENO UNIVERSITY ISO 9001:2008 CERTIFIED oSMAC 407; PRINCIPLES OF FINANCIAL MANAGEMENT QUESTION ONE (30 MARKS) a). & Explain the following concepts:- (mks) (i). Indenture (ii). Profitability index Accountability Rate of Return. \ iv). Ex-post Budget (v). Master Budget (). Explain the concept of the principal budget factor and give reasons (Smks) y it is important in budgeting. Gi). ©. (@). ccs Q@. (ii). Give and explain four characteristics of a good tax system. (4mks) Give and explain three methods for computing interest. (3mks) ‘Assume an investor had a bond with an 8 percent coupon interest rate, a par value of 100, 000 dollars and a market price of 70,000 dollars. Obtain the ccutrent yield of the bond. (2mks) Give ang plain five annual financial statements. (Smks) Compute the Net Present Value of the following project using discount rate of 10 percent. es Ey r= Z, E Year | 2000 . Year 2 Nw 2200 ou Joe act oe Year3 1800 oot Comment on the results, (3mks) Creer oe Bz 599 wv ).% Be wo Coe? = = Gui)(©). If you take a 30 — year mortgage for 200,000 dollars at 9 percent interest, what will your monthly payment be? Construct an amortization schedule for the first two periods. (3mks) QUESTION TWO (20 MARKS) 2). (i). Explain why we need to practice financial management —_(6mks) (ii). Give reasons why it is important for a company to have either: (1). Too much cash or (2). Too little cash in its asset composition relative to its cash requirements. (4mks) (>). (i). Explain to what extent can accounting flow, in particular depression provision provide finance for an economic entity. (4mks) (ii). A company had sales of 2 million dollars this year. It’s cost of goods sold was 1.2 million dollars and its operating expenses were 400,000 dollars. Interest expenses on outstanding debts were 100,000 dollars on preferred stock dividends. The company received 10,000 dollars on preferred stock dividends and interest income of 12,000 dollars. The company sold stock that had been owned for 2 years for 40,000 dollars; the original cost of the stock was 30,000 dollars. Compute the company’s taxable income and its tax liability using the following marginal tax rates (6mks) Tax rates Income($) 15% x 50,000 25% x 25,000 34% x 250,000 5% surtaxQUESTION THREE (20 MARKS) @). Gi. (ii). (b).c” @. Why do we need to practice financial management? (6mks) paying an annual You place 25,000 dollars in a savings account then move it into a compound interest of 8 percent for 3 years and. savings account that pays 10 percent interest compounded annually. How much will your money have grown at the end of 6 years? (4mks) Give and explain four factors which influence profits made by a business organization during a particular trading period. (4mks) (ii). A company’s sales for the year 2013 were 240,000 dollars and its dperating costs amounted to 228,00Q_dollars. During the same period, the company’s operating assets averaged 80,000 dollars. Obtain:- (1). Return on assets for the company —? ~ (2). Turnover ratio (3). Profit margin (1mk) (4). Give reasons why industries with high tumover have low profits \ margins, while those with low turnover have high profit margins. (3mks) QUESTION FOUR (20MARKS) (a). i). Prepare and explain dummy cash budget and give with clear explanation problematic areas of budgeting. (6mks) (ii). ‘A company has been expanding its level of operation for the past two years. The company’s sales have grown rapidly as a result of the expansion in the economy. However, the company is a privately owned company and the only source of available funds it has is a line of credit with its bank. The company needs to expand its inventoriesto meet the needs of its growing customer base but also wishes to maintain a current ratio of at least 3. If the company’s current assets are 6 million dollars and its current ratio is now 4, how much can it expand its inventories — (financing its expansion with its line of credit), before the target current ratio is violated? (4mks) (b). Explain the following concepts:- (4mks) (i). Revolving credit agreement (ii). Sinking fund provision (iii). Operating leverage (iv). Line item budget (c.). Use the percentage of sales method to prepare a proforma income statement for company ABC. Projected sales for the following year equal 4 million dollars. Cost of goods is 70% of sales; administrative expense is 500,000 dollars and depreciation provision is 300,000 dollars. Interest expense is 50,000 dollars and income is taxed at a rate of 40%. The firm plans to spend 200,000 dollars during the period to renovate its office facility and will 150,000 dollars in notes payable. Finally, selling expense equals 5% of Sales (6mks) QUESTION FIVE (20MARKS) wy sy (2mks) (a). (i). _ Explain the need for setting costs by a business firm. Gi). A company is planning to invest in a security that has several possible rates of return. Given the following probability distribution of returns, what is the expected rate of return on the investment? Compute the standard deviation of the returns.What do the following resulting numbers represent? __(6mks) ). @. Probability Return Pk) (ki) 10 -10% .20 5% 30 10% 40 25% In a business company, it is generally expected or desirable to maximize profits and maintain a favourable liquidity position at the same time. Sometimes these two requirements may be mutually exclusive. (ii). Give a few occasions when a favourable result in one of the requirements adversely affects the other. (4mks) You are considering a project that will require an initial outlay of 54,000 dollars. This project has an expected life of 5 years and will generate after tax cash flow to the company as a whole of 20,608 dollars at the end of each year over its 5 year life. In addition to the 20,608 dollars cash flow from operations during the 5" and final year, there will be additional cash — inflow of 13,200 dollars at the end of the 5" year associated with salvage value of the machine making the cash flow in 5 equal to 33,808 dollars. Therefore, the cash flows associated with this project appear in the schedule below:~ Cash flow in dollars Initial Outflow 54,200 oe Inflow Year | 20,608 Inflow year 2 20,608© Inflow year 3 20,608 Inflow year 4 20,608 Inflow year 20,808 Given a required rate of return of 15%. Obtain the following: (1). Payable period (2). NPV (3). Profitability index (c.). Explain the concept:~ (1). Book value (2). Financial leverage esl (6mks) (2mks)Davis m{looo \\ory SEND =) MASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2016/2017 FOURTH YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF BACHELOR OF SCIENCE IN ACTUARIAL SCIENCE WITH INFORMATION TECHNOLOGY MAIN CAMPUS © MAC 403: ACTUARIAL LIFE CONTINGENCIES II Date: 1" December, 2016 Time: 8,30 - 11.30 am INSTRUCTIONS: ¢ Answer question ONE and any other TWO questions. ¢ Show all the necessary workings © Start each question on a new page. ¢ Observe further instructions on the answer booklet. MASENO UNIVERSITY ISO 9001:2008 CERTIFIED ©QUESTION 1 [COMPULSORY] [30 Marks] (a) Explain what is meant by the following in respect of a life insurance policy; [6 Marks} (i)gross premium prospective reserve. (6 Marks} (ii)gross premium retrospective reserve. (b) Describe how a life office can calculate the new sum_assured Or annual premium on the alteration or conversion of an existing policy. [6 Marks] (c) Consider ¢Vz, the reserve during t years for a whole life assurance to a life age x.Assuming death benefits are payable at the end of the year of death and ultimate mortality,show that the net prospective reserve and retrospective reserve are equal. [8 Marks] ain the context of profit-testing explain the difference between the “profit vector and profit signature, [4 Marks}> AVA certain life office sells assurance policies with term.3:years to lives aged 70. For each policy, the profit vector is estimated to be (-50,30,30).Given that the mortality of the policyholders expected to follow A1967-70 ulti- mate, calculate the profit signature per policy sold and the the net present value of the profit the office (on the basis of a risk discount rate of 8%p.a) [8 Marks]QUESTIQN 2[20 MARKS] (a)Define the following cnn alleen! fer mene (inet premium reserves ~ "0°" wn yp by msc (2 Ma) (ii)Zillmerised reserve > «°*% wa hh 1 gue nak ores (2 Marks] (b)Ten years ago a life ofice issued a 20-year endowment assurance without profits to a life age 35. The sum assured is 100,000 payable at the end of the year of death (or on survival for 20 years), and premiums are payable annually in advance. The basis for premiums and reserves is; A1967-70 ultimate; 6% p.a interest; expenses are 3% of all all office premiums (including the first) with additional initial expense of 1.5% of the sum assured.Calculate (i)the annual premium. [4 Marks] (ii)the reserve before the receipt of premium now due. (6 Marks] (iii) the reserve after receipt of the premium now due. (6 Marks] fQUESTION 3[20 MARKS] (a)Give formulae for the following net premium reserves in terms of other monetary functions: oem and (Hm) by (i)the prospective method and [5 Marks] (ii)the retrospective method [5 Marks] b)Given P, = 0.02, ,Vz and Py:,' = 0.25. Calculate Pl 4 Marks} ™ em (c)Show that (6 Marks] QUESTION 4[20 MARKS) (a)Given that mortality profit in the policy year ¢ + 1 is DOWY + PIL +A) = (8a V- Den all deaths all Consider a single policy in the group and assuming that accumulated funds at the end of the year must provide for the expected cost of death claimsand the expected cost of setting up reserves for survivors as (V+ P)(L +4) = Saeset (1 = dere) Show algebraically that mortality profit is E.D.S — A.D.S [10 Marks] (b) A 10 year “double endowment”? assurance policy issued to a group of lives aged 50, a sum assured of Kshs.10,000 is payable at the end of the year of death and Kshs.20,000 is paid if the life survives to reach the maturity date. Premiums are payable annually in advance. You are given the following additional information « Reserve at the start of the 8 year (per policy in force)-Kshs.12,940 Number of policies at the start of the 8th year-200 ¢ Number of deaths during the 8th year-3 Annual premium per policy-Kshs.1,591 Assuming that the reserving basis uses ELT15(Males mortality and 4% interest, calculate the profit or loss arising from mortality in the 8 year and comment on your results. [10 Marks]1 QUESTION 5[20 MARKS] a g the issue of 3-year annual-premium endowment Your office is considerin| fit to lives aged 62. In respect of a policy assurance policies without pro! with sum assured Kshs.100,000, payabl within 3 years) or on maturity, calculate the profit's eat the end of the year of death (if jgnature.and the profit vector on the following assumptions Premium basis: mortality- AM92 © interest- 6%p.a # expenses-3% of all premiums Reserving basis: « rate of interest to be earned in the life fund -8% per annum # expenses-3% of office premiums * mortality-AM92 « risk discount rate-10% per annum [20 Marks]MASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2016/2017 FOURTH YEAR FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF SCIENCE IN ACTUARIAL SCIENCE WITH INFORMATION TECHNOLOGY MAIN CAMPUS MAC 403: ACTUARIAL LIFE CONTINGENCIES I! Date: 16" * February, 2018 Time: 8.30 - 11.30am INSTRUCTION * Answer Question ONE and any other TWO. MASENO UNIVERSITY ISO 9001:2008 CERTIFIED eoQuestion 1 (30 marks) a) Briefly differentiate the following; (i) a Define Benefit pension scheme and a Defined Contribution pension scheme (ii) a ‘funded’ and a ‘non-funded’ pension scheme ,_(6marks) 6) Give an example of a ‘non-funded’ pension scheme and describe how it may ‘be financed (4 marks )~ ae ¢) Alife office is proposing to issue 3-year sickness benefit policies to lives aged 30, The benefits are £50 per week during sickness within the next three years. _There is no waiting period and the off-period is as in the Tables provided. Find the single premium on the following basis: Mortality: E.L.T. No. 12-Males Interest: 4% Sickness: Manchester Unity 1893-97(AHJ) Expenses: none (10. marks) d) Alife office issues a large block of 3-year unit-linked endowment assurances under which 80% of the first year’s premium and 101% of subsequent premiums are invested in units at the offer price. The bid price of the units is 95% of the offer price. The units are subject to an annual management charge of 0.75% of the bid value of the fund at the end of each policy year. The annual premium is £1000 and unit prices are assumed to grow at 9% per annum. Calculate the bid value of the units at the end of each year, according to the office’s projections. (10 marks ) Question 2 (20 marks) (a) Describe briefly the technique ( “zeroisation”) by which reserves are calculated, if a profit test for unit linked policy reveals negative cash flow in the second or any subsequent years. ( 6 marks }(b) An office issues 2 3-year unit-linked policy of £500. The death benefit, payable at the end of year of death, is £1000 or the bid value of the units if greater. The maturity value is the bid value of the units at maturity. 95% of each premium is invested in units at offer price. The bid price of the units is 95% of the offer price. Management charges of % % of the bid value of the units are deducted at the end of each year( before payment of death and maturity claims ). The office expects to incur expenses of £75 at the start of the first year and £25 at the start of each subsequent year Using a profit testing analysis, calculate for a life aged 60 at entry {i) the expected profit in each of the 3 years per policy in force at the beginning of the year, the issue date of the expected profit from one (ii)the net present value at num. policy assuming a risk discount rate of 10% per an unit fund grows at 8% per annum( before deduction of arges), that sterling reserves need not be maintained at the lity of surrender may be ignored. The sterling reserves earn ‘Assume that th management ch of each year, and that the possibi low A1967-70 ultimate and year. ( 14 marks) end mortality of policyholders fo interest at 6% per annum during each policy Question 3 (20 marks) rovides an annual pension on the pension scheme of a certain company PI nt of (for ‘ill-health’ or ‘age’ reasons) of amount equal to one per ce earnings throughout his service. The pension is payable in event of a member dying in service there Is payable at 10 . There is no benefit on withdrawal. retirement the member's total weekly. In addition, the time of death a lump sum of £30,00 II members’ salaries in the Il exactly cover the cost of al salary rate of constant percentage of a tage is that which wil the fund at age 30 with an inith The company pays 2 pension fund. The percen benefits for anew entrant to£10,000 per annum. Contributions are payable continuously, and the employees do not contribute to the scheme. Expenses are negligible. (a) Calculate the contribution rate paid by the company, assuming the last retirement age is 65. ( 10 marks) (b) A valuation of the fund is to be conducted. For each active member of the scheme there is recorded (i) the age nearest birthday at the valuation date (ii) the annual salary rate at the valuation date, and (iii) the total past earnings in service( prior to the valuation date) For each age, the totals of (ii) and (iii) are recorded and the following is an extract from the data. | ‘Age No. of Members | Total past Total of annual aged x earnings for salary rates for members aged x _| members aged x in£ ine 25 11 302,100 70,100 Assuming that the basis of the Tables provided is appropriate, find the liability at valuation date for the benefits payable to the members aged 25, and determine whether the future contributions payable in respect of these members are more or less than sufficient to cover the benefits. 10 marks ) _ Rison 4 (20 marks) (a) Define, with respect to provision of sickness or disability benefits by a scheme, (i) deferred period Tc. eter fellly nie a (i) off-period 5... (iii) waiting period — (6 marks ) be Sense) bendy & Glen e (b) A friendly society Issues sickness insurance policies which provide income during periods of sickness as follows: f bets lh 6 Che Kn beans J Sttrne ys pricy #otby >(i) £100 per week while a sickness has a duration in excess of 13 weeks but less than 1 year; (ii) £75 per week while sickness has a duration of 1 year but less than 2 years; (iii) £50 per week while sickness has duration in excess of 2 years. All benefits cease at age 65. Premiums are payable weekly until age 65 and are waived when sickness benefit is being paid. There is no waiting period. Calculate the weekly premium for alive aged 38 atentry. 9 <"* * 2 OD x F218P ~ on x Sap aa] Basis: on 4 KS bE, 9 se bavint Mortality: E.L.T. No. 12 Males Sickness: Manchester Unity Sickness Experience 1893-97, Occupation Group AH. 20 (128 17 (4 Es poh eo ae Interest: 4% p.a Expenses: 50% of all premiums payable n the first year, plus 10% of all (10 marks) (+ p[ ar premiums payable after the fist year. | Aiiestion 5 (20 marks) { a “ (a) Differentiate between unit-linked policies and with-profit policies. ?22..>< (4 marks) (b) Bonuses are usually funded by distributing part of the surplus. Why might the company distribute just part of the surplus rather than the all of it? _Apmarks) __(o} Calculate the annual premium that should be paid annually in advance bya.) = «> “40-year old policyholder for a 20-year endowment assurance with a basic sum assured of £40,000 and where death benefits are payable immediately on death. Assume an interest rate of 6% per annum, AM92 Ultimate mortality and a future compound bonus rate of 1.92 % per annum vesting at the end of each policy year. (10 marks){ } MASENO UNIVERSITY } UNIVERSITY EXAMINATIONS 2016/2017 Ee hs FOURTH YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF BACHELOR OF SCIENCE IN ACTUARIAL SCIENCE WITH INFORMATION TECHNOLOGY MAIN CAMPUS epee MAG 415: SURVIVAL ANALYSIS Date: 13" December, 2046 Time: 12.00 - 3.00 pm « INSTRUCTIONS: * Answer question ONE and any other TWO questions. MASENO UNIVERSITY IS 9001:2008 CERTIFIED eoQUESTION ONE (9). Write down the equation of the Cox PH model in which the hazard function re depends on the chration ¢ and a vector of covariates 2, define all the terme you use. [2 marks] 4t, Explain why the Cox's model is sometimes described as *semi-parametric”. [1 mark] (©) Suppose you have fitted the following proportional hazards regression model to the mortality data for a sample of life-assurance policyholders, /n(O) = ho(t)eap{0.01(2; ~ 30) + 0.2% ~ 0.0525} where: 4 = denotes theageat entry of life ¥ = liflife iisasmoker and zero otherwise = = liflife i isa female, zero if male. i, Describe the class of lives to which the baseline hazard function applies.{2 marks} ii, What does the model (if correct) tell you about the survival function of a mal smoker aged 30 at entry, relative to that of a female smoker aged 40 af entry? (3 marks} ili, What does the model (if correct) tell you about the survival function of a female smoker aged 30 at entry, relative to that of a male non-smoker aged 40 at entry? (2 marks} (c) The table gives the data for a pal sample of employees in a factory. It shows the time in months until the first a6Sence from work. Observations marked + show the Uine-oLeaving for these employees who left employment without being absent from Maleemployees 6+ 11 13+ 15 16+ 19+ 99 Femaleemployees 2+ 4 7 8+ 10+ 42+ 17 94+ . A Cox Proportional Hazards Model « A(t) = Ao(te “Br, is to be fitted to these data wh Ao(t) is the baseli fe Fis the time until the first absence from work, hazard and x = 0 for males, x = 1 for females 1. Show that the pa:tial log-likelihood for these data can be written "(B) = 38 — Atn( + €%) + 2in(2 +e) + ¢ where ¢ is a coustant that does not depend on B {7 marks} E(5 marks} ii, Calculate the masituum partial likelihood estimate of J4H Caleulate the asymptotic standard error of this estimate {3 marks} 'v. Test the hypothesis that female employees experience higher first absence rates, than male employees. Explain the steps in your argument and aire your con- clusions [2 marks} (4) The following data refers to failure-times of the groups of asthma patients, Group ' consists of patients who received the-drug and group 0 was given the placebo, Group0 15 18 HD] |- HG wet Group1_10* 1 20* 33 oF Carry out a logrank test at a = 0.05 (5 marks] QUESTION TWO (a) The Cox proportional hazat dents leave a certain profession before qualificat profession, students + joining the profession. In the fitted model, the hazard depends on the time, 1, since joining the profession and three covariates. The covariates, ther catogories and the fitted parameters fe Con category are shown in the table below: Covariate Possibility Parameter Employersiae erge on none 0.3 Degreestudiea Sclmee 704 other oO London 0 Location other Uk -0.3 overseas 04 5) }. Defining clearly all the terms you use, write down an expression for the hazard 2» function in this model [3 marks} jon under [2 marks} for one year moves from a small probability that he will qualify with probability that he woald have qualified mall employer PS, all other factors being equal 2 it. State the class of students which is most t likely to proceed to qualificat this model, and that which is least likely, A student who has been in the profession employer to a large employer. Express the the large employer PL in terms of the if he had stayed with the marks} 2 (b) For what reasons might lives he lost to the hivestigation if wo are carrying out ation into the death from natural eauses oyll: a study of the mortality of life insurance policyholders i. @ national inves [4 marks)(c) During a 2 year trial for a new medical treatment, 50 patients were observed after receiving the new treatment on 1 July 2000. For those patients who died or who loft the trial before 30 June 2002, a record was kept of their time spent under ob- servation, The details are shown below: Period under observation (in months) for patients who: Died Lefttrial 4 2 6 5 6 7 8 9 ul 10 16 13 22 15 18 i, Calculate the Kaplan-Meier estimate of the survival function, S(t). [5 marks] ii. Sketch the hazard, h(t), implied by the Kaplan-Meier estimate of S(t), [4 marks} QUESTION THREE (a) The population of elderly people in a prison is observed during the period 1 January 1994 to 31 December 1996. The duration of residence (measured to the nearest” number of months) is recorded for those who die during the period, for those who are released from the prison during the period and for those who are still in residence on 31 December 1996. The recorded data measured in months are Gt 6 G6 7 9F 10 10 1I* 13 16 17+ 20 23+ where + indicates those who were released from the prison during the period or who were still in residence on 31 December 1996. aie © i. State the type(s) of censoring present in these data Calculate the product-limit (ICaplan-Meier) estimate of the survival function, S(t), where ¢ is the duration of residence in the pri (7 marks} State the assumptions underlying the estimate in (ii), and explain how each of [4 marks} A group of (2 marks) ii these assumptions would apply to these data (b) An‘investigation is carridd out into the lifestyte of male accountants, 1090 accountants is selected at random on | Januaty 2001, Each member of the ae opie detailed personal information as at 1 January 2001 includ address date of bisth and marital status. Tho same information is collect edch 1 January the years 2002, 2003, 2004 and 2005. ‘The investigation closes in 2005, A PhD student wishes (0 use the data from this investigation for her thesis on The mortality of married men, Describe the ways in which Ue available data for this (4 marks} as at investigation are censored ‘A tuial for the life of a new battory was earried out by placing 1,000 batteries inside 1,000 fully electrical toys. ‘The toys were turned on and left to run for 24 hours Aresearches returned every hon! count how many toys had stopped operatingOn close analysis it was discovered that some of the toys had ceased to operate due to mechanical problems and that some of the toys were not switched on in the finer Place. Some of the toys were still running after 24 hours. For each of the following types of censoring, state with reasons whether it is present in the investigation: i. left-censoring ii. interval censoring / ei iii. type I censoring iv. non-informative censoring / [4 marks} QUESTION FOUR (a) A Cox PH model was estimated to assess the effects on survival of a person’s sex and-his or her self-esteem (measured on a three point scale as “low” ot "medium” or high”). The baseline category was males with "low” self-esteem. Write down the equation of theTodel, using algebraic symbols to represent variables and para- meters defining all the symbols that you use.“ [5 marks] (b) TF feo = 0.01, jt = 0.02, fica = 0.08, estimate the values of Peo, aPeo and spo. [3 marks} (c) In a clinical trial, 59 patients are observed for two years following treatment with a new drug. The following data show the perio@i complete months from the i treatment to the end of observation for those patients who died or withdrew from the trial before jhe end of the two year period. . Deaths ae rol 18, 20, 20, 23 ws Withdrawals’ 1.3/4, 8, 40, 18 i, Calculate the Nelsbn-Aalen estimate of the integrated hazard function, Ay. [6 marks} ' ji. Hence, or otherwise, estimate the probability of a patient surviving for at least 18 months after the initial treatment. {1 mark] (d) Show that the survival function of a Cox PH model is given by S(t, X) = [So(t EE A, : : i [5 marks} QUESTION FIVE (a) 12 brain tumor patients were randomized into radiation or radiation-+chemotherapy. One year after the start of the study, survival time in weeks ere recorded as follows, GroupORT 10 26-28 30 41 1a" Group1RT+CT 24 3042 40* 30+ 42+ ee .05, (8 marks} Apply a likelihood ratio test at a = 5(b) Show that if the hazard function has the form o8(a 1)? exp[(a#)*], then the survival function is exp{— exp(at)? — 1}. (6 marks] (c) For a particular investigation the hazard of the mortality is assumed to take the form ; h(t) = A+ Bt where A and B are constants and £ represents time. For each life i in the investig- n), information was collected on the length of time the life was = 1 if the life died, 0 ation (i = 1,--+, observed, t;, and whether the life exited due to death (5; otherwise), i. Show that the likelihood of the data is given by 7 1 L=|[(A + Bi) exp[—At, - 5 Be? Te + Bt)* exp|—At ~ 5 Bt] [3 marks} ii, Derive two simultaneous equations from which the maximum likelihood es- timates of the parameters A and B can be estimated. [3marks]MASENO UNIVERSITY EXAMS MAGAI6 CAT Tine. 1 HR Date, 1.102016 Instructions: Attempt ALL Questions , 1. The population of elderly people in n prison is observed cluring the period | January, 105 31 December 1996. ‘The duxation of sesidence (measured! 10 the nearest number of months) is recorded for those who ie di luring the period, for those who are released from the prison during the period and for those who ate still in residence on 31 December 1996 The recorded data measured in mouths are Gra. Less G, 6.6, 6, 7, 9%, 10%, 10, 1f*, 13, 16, 17%, 20, 23* 7 é where findicates those who were released from the prison during the period or who were still in residence on 31 December 1996. (a) State the type(s) of censoring present in these data. {2 marks} (b) Calculate the product-limit (Kaplan-Meier) estimate of the survival function, S(t), where | is the duration of residence in the prison. (7 marks) (c) State the assumptions underlying the estimate in (b), and explain how each of these assumptions would apply to these data. (4 marks] 2. A life insurance company has carried out a mortality investigation. It followed a sample of independent policyholders aged between 50and 65 years. Policyholders were followed from their 50th birthday until they died, withdrew froim the investigation while still alive, or reached their 55th birthday (whichever of Uese events occurred first) (a) Describe the types of censoring that are present in this investigation. (2 marks} (b) An extract from the data for 12 policyholders is shown in the table below. Use these data to calculat» the Nelson-Aalen estimate of the survival function Life Ayeatlifewasobscrved Reason : : Years __ months T 50 9 died 5 2% 61 3 withdrew 3 61) 6 died 4 4 — 6 died © 5 ole 6 withdrew ¢ 6 52 9 withdrew < 7 os 3 withdrew ~ 8 54 3 died 9 4, 6 died 2 10 56 0 reached nge55 ¢ Hi oo 0 venched age 55¢ 2 56 0 reached age 55¢ (c) Determine an approximate 95% confidence interval for your estimate of the sant function S (6 marks} Az bang 1Mtlooo aloe om , Azene DAviC MASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2016/2017 FOURTH YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF BACHELOR OF SCIENCE IN ACTUARIAL SCIENCE WITH INFORMATION TECHNOLOGY MAIN CAMPUS MAC 405: INVESTMENT AND ASSET MANAGEMENT II Date: 28% November, 2016 ‘Time: 8.30 - 11.30 am INSTRUCTIONS: Answer question ONE and any other TWO questions. Show all the necessary workings Start each question on a new page. Observe further instructions on the answer booklet. MASENO UNIVERSITY 180 9001:2008 cerTiFieo ©Y Po SHSMAC 405: INVESTMENT AND ASSET MANAGEMENT IT QUESTION ONE (30 MARKS) (a). Explain the following concepts:- vt) (Smks) (i). Spot rate (ii). Dedicated portfolio Macaulay’s Duration (iv). Defensive Securities (v). Zero courn bonds (b). (i). Give the advantages of asset pricing theory over capital asset pricing model. (3Mks) (ii). John Byron is considering an investment in the security of company XYZ. He expects the company to earn a return of 17 percent in the following year. The company’s beta is 1.3. Riskless rate of return is 7 percent and market return is 15 percent. Is it advisable for John to invest in the company? Give reasons. a. qu 4Mks) / (©). @. Give the model for obtaining price volatility of a compound. Coup md: 5 (ii). Merisa is able to borrow and lend at the riskless rate of 12 The market portfolio of securities has an expected returt 20 pe cent and a standard deviation of 25 percent. Determine the expected retum and standard denon ert (1), [fall investment is made in the riskless asset. (2mks) (2). If two-thirds of the wealth are invested in the riskless asset and / one-third in the market portfolio; (2mks) /G). tall the investment is in the market portfolio. (2mks) 4 \ U 33 ( 2t&) \ - 09333( ‘e Ar 2F cuit) 4 oft) ovbl \2 () 4 2(4). (i). Explain the concept security market line in relation to expected returns and betas. (mk) (ii). Barack Obama investment has a beta of 1.5. The riskless rate is 7 percent and the expected return on the market portfolio is 14 percent. The company pays a dividend of 2.5 dollars per share and investors expectabil growth in dividend of 12 percent per annum for many years to come. Compute the required rate of return on the equity according to CAPM. What is the present market price of the equity share assuming the computed return as required return? (4Mks) (©). (ji). Explain how you would immunize the bond portfolio using immunization technique. (Imk) (ii). Explain the concept spot rate curve and give, its other two names. (3Mks) QUESTION TWO (20 MARKS) (a). (i). Explain the concept capital market line (2Mks) (i). Owiti — Ayoma Memorial Investment manages a stock fund consisting of four stocks with the following market values and betas. Stock Market Value ($) Beta Sell 1,000,000 120 —7 9+ Baca )> Bell 2,000,000 1.16 g t HELM a ole? Grill 1,960,000 0.80 a7 | Shrill 50,000 050 94 ere hri , 50 Of e If the riskless rate of interest is percent and the market return is 15 percent. What is the portfolio expected return? (SMks) (b). (i). Explain the term structure of the interest rate. (@Mks) (ii). Given the two factor model2 Lb JUESTION THREE (20 MARKS) oe a rep ( (b) Y E(R) = 4+ 3b, + Sby with beta value of bj; = ~.666 and bi = 1.6, Determine the present value of the following cash flow: Year Cash Flow(S) 1 -5000 2 4000 3 5000 4 -2000 5 6000 (iii), Give a formula which can be used to compute the expected returns for different situations, like mixing risk-free assets with risky asset and mixing th orrowing with risky ae (4Mks) p= REX Real. whe e- +R 4X Stiien +X ae pi i, wt te (4-4) Seevrhes H hes ew (i). Explain the concepts dyrati aif and transmutation. 21 : a Y Rise wil i) rete (ii). Compute the duration for bond X and bond Y ‘with 7 percent and 8 percent coupons having maturity periéd of 4 years. Dm» VéCv~ 2" peri y ap vay wel ‘The face value is 1000 dollar“ Both bonds are currently yielding 6 percent. (6Mks) (i). Give and explain Lyf gierence between efficient frontier and capital market line. (2mks) Cay A riskless zero-coupon bond with 10 years to maturity has a face value of 500 dollars and sells for 192.77 dollars. Compute:- (3Mks) (1). The nominal yield on the bond (2). The real yield on the bond, if the inflation rate over the life of the bond is 5 percent.@ (3). The real yield, if the inflation rate is 8 percent. (©). (i). Explain the concept aggressive security. (2Mks) (ii). Give five basic assumptions of capital asset pricing, model, (SMks) QUESTION FOUR (20 MARKS) (a). (i). Give and explain four reasons which support the validity of capital Asset Pricing model (4Mks) (ii). Evans buys a bond with four years to maturity. The bond has a coupon rate of 9 percent and priced 100 dollars in the market. Compute:-~ (1) The duration of the bond (4Mks) (2) The percentage change in te price of the bond, if the interest rate rises to 10 percent.» 1 (4Mks) (b). (@). Give and explain four types of bond risks. (4Mks) (ii). Determine the price of 1000 dollars zero-coupon bond with yield to maturity of 18 percent and 10 years to maturity. If the price of this bond changes to 220 dollars. Compute the yield-to-maturity of the bond. (4Mks) ‘STION FIVE (20 MARKS) mT) . (i). Give three_basic assumptions of arb fege asset pricing model” (3Mks) ' (ii). Bernard has 50,000dollars to make one time investment. He needs his money back after two years for educational expenses. He has a choice of two types of bonds:- ea(1). Bond “A” has a coupon rate of 7 percent and maturity period of 4 years with a current yield of 10 percent. Current price is 904.9 dollars. (2). Bond “B” has a coupon rate of 6 percent and maturity period of one year and current yield of 10 percent. The current price is 963.64 dollars. Duration of bond “f” is 3.603 years. Compute:- (1). How Bemard should invest U~ (2). The types of risks involved a (8Mks) (b). @). Give and explain three theorems which explain the term structure of interest rate (4Mks) <— ii). XYZ company’s share price on January 31", 2014 was 401 dollars (P) and the price on September 24, 2014 was 480 dollars (Pr+1). Dividend received was 35 dollars (D). ae —~s Compute the rate of return ce (3Mks) yet Y rebim G fev) -Ry +8 Pe neo -yolt 3 = UIE XIS = Qg.93Z ae HotMASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2017/2018 FOURTH YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF BACHELOR OF SCIENCE IN ACTUARIAL SCIENCE WITH INFORMATION TECHNOLOGY MAIN CAMPUS MAC 405: INVESTMENT AND ASSET MANAGEMENT Date: 12" February, 2018 Time: 8.30 - 11.30 am INSTRUCTIONS: « Answer question ONE and any other TWO questions ¢ Show all your workings clearly MASENO UNIVERSITY 'SO 9001:2008 CERTIFIED ro) - |QUESTION ONE a) Explain the following concepts; i. Macauly’s duration ii, Dedicated portfolio ii. Immunization iv. Defensive securities v. Zero-coupon bonds b) (i) Give the advantages of asset pricing theory over capital asset pricing theory [3 marks] (ii) Obama is considering an investment in the security of a company. He expects the company. to earn a return of’17\% in the following year. The Company’s beta ig 1.3) Risk free rate of retum is 7 percent and market return is 15 percent. Is it'advisable for Obama to’ invest in the company? Provide reasons. ¢ [4 marks] (i) Give the model for obtaining price volatility of a coupon bond. [3 marks] (ii) Sheila is able to borrow and lend at the riskless rate of 12\%. The market portfolio of securities has an expected return of 20 percent and a standard deviation of 25 percent. Determine the expected retum and the standard deviation of portfolios. [5 marks] c (1) If all investment is made in the riskless asset. {1 mark] — (2) Iftwo thirds of the wealth are-invested in riskless asset and-one third in the market portfolio. [1 mark] (3) Ifall the investment is in the market portfolio. [I mark] 4) i) Explain the concept spot rate. [1 mark] ~~ (ii) Give two names of spot rate. [2 marks] (iii) A company has a beta of 1.5. The riskless rate is 7\% and the expected retum on the market portfolio is 14\%. The company pays a dividend of 2.50 dollars per share and investors expect a growth in dividend of 12 percent per annum for-years to come, Compute the-required-rate-of-return: orrthe-equity— according to Capital Asset Pricing Model. What is the present market price of the equity share assuming the computed return as required? [4 marks] _ e) (i) Explain the concept security market line in relation to expected returns 4 and betas. [2 mai(ii) Give four assumptions present in Capital Asset Pricing Model but are not assumed in APT model. [4 marks] QUESTION TWO “ar Explain the concepts duration drift and transmutation. (2 marks] Gi) Compute the duration for bond X and bond Y with 7% and 8%coupons having maturity period of 4 years. The face value is 1000 dollars. Both bonds are currently yielding 6%. [6 marks} b) (i) Give five basic assumptions of capital asset pricing model. (5 marks] 7 (ii) A risk free zero coupon bonds with 10 years to maturity has a face value wt of 500 dollars and sells for 192.77 dollars. Compute; \Or es 1) The nominal yield on the bond. [1 mark] 2) The real yield on the bond if the inflation rate over the life of the bond is 5 percent. : | ton) | ~ 3) The real yield if the inflation rate is 8 percent. [1 mark} c) (i) Explain the concepts efficient frontier and capital market line[2 marks] (ii) Explain the concept aggressive security. -- [2 marks] QUESTION THREE io Give and explain three theorems which explain the term structure of interest rates. [6 marks] Gi) John Byron has 50000 dollars to make one time investment. He needs his money back after two years for educational expenses for his son. He has a __ choice of two types of bonds; _ = . _ . - 1) Bond A has a coupon rate of 7 percent and maturity period of four years with a current yield of 10-percent. Current price is 904.9 dollars. (% 2) Bond B has a coupon rate of 6 perdent a and maturity period of one year and current yield of 10 percent. The current price is 963.64 dollars. Duration of bond Bris(4.603 years. Compute; A How john Byron should invest. B. The types of risks involved. [6 marks] ») (i) Give three basic assumptions of arbitrage asset pricing model. [3 inark’s) k ye AV yt EY ' ea a Cee Wo 7 92016 was 401 dollars (P) and (ii) ABC company’s share price on January 31", (Py). Dividend received was the price on September 24", 2016 was 480 dollars 35 dollars(D). Compute the rate of return. L“ [3 marks] (iii) Geoffrey is considering the purchase of a bond currently selling at 878.50 dollars. The bond has 4 years to maturity, face value of 1000 dollars and 8 percent coupon rate. The next annual interest payment is due after one year from today the required rate of return is 10%. 1) Calculate the intrinsic value of the bond 2) Calculate the yield to maturity of the bond. QUESTION FOUR a) (@) Explain the term Structure of interest rates. (ii) Given the two factor model B(R)=4+3b)-+5ba with beta value of bi:=-0.666 and ba=1.6, determine the present value of the following cash flow. Year Cash flow 1 -5000 2 +4000 3 +5000 4 -2000 5 +6000 [6 marks] ) (i) Give a formula which can be used to compute the expected returns for different situations, like mixing riskless assets with risky assets, investing only in the risky asset and mixing the borrowing with risky assets. [4 marks} (ii) An organization manages a stock fund consisting of four stocks with the following market values and betas; Stock Market value($) Beta Fanta 1000000 1.20 Coke 2000000 1.16 Sprite 1960000 0.80 Stoney 50000 I 0.50 If the riskless rate of interest is 9% and the market return is 15%, what is the portfolio’s expected return? ‘ [5 marks) ii) Estimate the stock retum by estimating the CAPM and the arbit model. The particulars are given below he 4 [3 marks] —1) The expected return of the market is 15 percent and the equity’s beta is 1.2. the riskless rate of interest is 8 percent. 2) Factor Market price of risk(%) sensilivily index Inflation 6 il Industrial production 2 0.8 Risk premium a) 1.0 Interest rate 4 -0.9 What explanation can you offer to explain the difference in two estimates? [1 mark] QUESTION FIVE a) (i) Give and explain four reasons which support the validity of Capital Asset Pricing Model [4 marks] (ii) Determine the price of 1000 dollars zero coupon bond with the yield to maturity of 18 percent and 10 years to maturity. If the price of this bond changes to 220 dollars, compute the yield to maturity of this bond. [4 marks] b) (i) Felow buys a bond with four years to maturity. The bond has a coupon rate of 9 percent and priced 100 dollars in the market. Compute; 1) The duration of the bond. [4 marks] 2) The percentage change in the price of the bond if the interest rate rises to 10 percent. [4 marks] (ii) Give and explain four types of bond risks. [4 marks]MASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2017/2018 FOURTH YEAR FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF SCIENCE IN APPLIED STATISTICS, ACTUARIAL SCIENCE, MATHEMTICAL SCIENCE AND MATHEMATICS AND ECONOMICS WITH INFORMATION TECHNOLOGY MAIN CAMPUS MIT 403: WRITING MACROS WITH L4T;EX Date:22" February, 2018 Time: 3.30 - 6.30pm INSTRUCTIONS: . Answer Question ONE and any other TWO, MASENO UNIVERSITY 180 9001:2008 CERTIFIED ©)(30 MARKS) [2 marks] QUESTION 1. COMPULSORY (9) What do you understand by D (b) Errors can be put into different categories sand give an example for each Jebugging as used in the cour List any two ‘common mistakes’ that could lead to the following errors (i) Undefined control sequence * 8 peel (i) Missing package = Vue ake fee [3 marks} (c) Write the soure ‘source code that will produce the table below. Program Units Code Math Science | MMA | Real Analysis (Actuarial Sci. | MAC | Risk Theory (Applies Stat. MAS | Probability Table 1: Simple table ya y "(6 marks}, (d) There are two main ways ways of bibliogr@phy management. Biv fox and the ent” bedded system. It is always a challenge dealing with capital letters in BibTeX. [2 marks] Briefly explain, (c) Explain TWO reasons why you would prefer creating a document in IXT}:X rather than WYSIWYG? {4 marks} (f) Give any FOUR ‘special’ characters in STEX and how they can be written to appear in your document? [4 marks} (g) You have an image that you want to use in your latex document. What's the first step you will take to include the image and give a short IATRX code including the image (‘img,png’ for example). Caption: ‘My first image’. What package(s) do you require? {6 marks] QUESTION 2. (20 MARKS) (a) (i) Give any two examples of floats as used in ETEX. oof mark) (ii) In your own words what do you understand by Float barrier and why and where will someone use \FloatBarrier and what package do you require to use it it {5 marks} (b) Write « BX code to give the following, What packages) is (are) ae Wrong yaatf( bx, 20 by assumption (8 marks} (c) Identify and correct the errors in the following extract. [6 marks} iarks| Page 2\begin{docunent) Let's do sose math. \begingatian) (3:0)"2620"2-2ab+b°2 \end(atign) Nend{docunent) QUESTION 3. (20 MARKS) \chapter(First chapter) (aed) 72G=0"24200+b°2\\, \docunentclass aspaper, 12pt] (article) this is the first chapcer of this document Tt has several sections. \section(The first section) Yhis section is the first and last (a) Give any two reasons why it is important to create customised commands in IBTEX? (b). Define a command that typesets its argument as both bold and italic. 6) Define commands with the given number of arguments that will work as explained in the table below. (2 marks} [3 marks} [15 marks} QUESTION 4. (20 MARKS) (a) (i) Give one reason why BibTeX is more preferred to the embedded bibliography. Command name | No. of arguments | Function [comb 2 -. ‘argi arg? matt 5 e eet seq 4 arglarg + 1+" + arglargs + are r ees : —" ovrund. 4 argl +--+ arg2+argi ay i ae ae [2 marks} (ii) Give any TWO ways in which BibTeX is different from embedded bibliogtaphy. (b) Briefly explain when, where and why the following are used \renewcommand{\bibname} {REFERENCES} \renewconmand{\refname} {REFERENCES} (c) Write TEX codes to show how you would write the following in both BibTeX and style] Page 3 [4 marks] {6 marks} embedded system [hint: use article as the document class and ae as the bibliogiaphy {8 marks}References (1] Acebron J. A., Bonilla L. L., et al, (2005). ‘The karumoto model: a sim- ple paradigm for synchronization phenomena. Review of modern physics, 77137-1835, [2] Arnold 1. V. (1989). Mathematical methods in classical mechanics. Springer-Varlog, New York, second edition, QUESTION 5. (20 MARKS) Write a TEX code that will produce the document Extract 1 attachedEXTRACT 1 Chapter 1 Measurable sets and Lebesgue measure 1.1 Measurable sets While outer measure has the advantage that it is defined for all sets, it is not countably additive. It becomes countably additive, however, if we reduce the family of sets on which it is defined. The best way to do it is to use the following definition due to Carathéodory: (see [1]) Definition 1.1.1 (Carathéodory). A set E is said to be measurable if for each set A we have p'(A) = "(AN B) + 4°(AN B). ‘Theorem 1.1.2. [2, Theorem 5.2.1] Buery Borel set is measurable, In par- ticular every open set and closed set is measurable, Provf. Since the collection 9 of measurable sets is a g-algebra, we have (—co, a] measurable for each a, since (—20,4] =~ (a,00). Since oo.) =U (-200- 3] (uy (00,6) measurable. Hence each open interval (a,) = (—00,0) n of a countable number a we have (a,co) is measurable. But each open set is the wr ff open intervals and so mnst, he measurable, also be found in [3]. ‘The above proof canReferences . Ge {1] Aliprantis C, D. and Burkinshaw O. (1998). Principles of Real Analysis. Academic Press. {9} Royden H. L. (1988), Real Analysis. Macmillan Publishing Company, New York, third edition. (3] Rudin W. (1976). Principles of Mathematical Analysis. G. Sprmger and P. J. Davis. Consulting Editors, third edition.be MASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2016/2017 SECOND YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF BACHELOR OF SCIENCE IN APPLIED STATISTICS, ACTUARIAL SCIENCE, MATHEMATICAL SCIENCE AND MATHEMATICS AND ECONOMICS WITH INFORMATION TECHNOLOGY “MAIN CAMPUS MIT 403: WRITING MACROS IN LATEX Date: 7" December, 2016 : Time: 3.30 - 6.30 pm INSTRUCTIONS: Answer question ONE-and any other TWO questions. |O INIVERSITY Z MASENO ‘INIVERS 1S 9001:2008 CERTIFIED © ~QUESTION 1. (COMPULSORY) (30 MARKS) (a) Debugging is an important part in any programming. i. ) define debugging as used in this course . LP marks} ii, ) explain any 3 errors one might incur while writing a I4TX dockrhent. (6 marks} (b) Most of the commands in I4T}X require certain packages otherwise one will get errors. State the packages required to run the following: (4 marks) Command package \FloatBarrier | \multicoluma \includegraphics \citep (c) There is a common problem that occurs with user-defined macros with no arguments Give an illustration of this problem and how one can solve it. (4 marks} (4) Define a command that takes two arguments: (a) a font sizing command (e.g. \snal1) (b) a line of text, and define the command so that the text in the second argument is centered and is sized according to the first argument. Give a demonstration of how it works : {8 marks] = (e) You can define your own environments in IATpX. Write your own environment that will number a single number to a given set of equations. For example [6 marks] a=btc =dte @) QUESTION 2. (20 MARKS) (2) For each of the following operations, write a command with the given number of arguments that does the same operation. Give an example to demonstrate how your command works. (12 marks} Page 2Operation | number of argument(s) [ command write the first 2 terms and 2 the last term of a se quence in the first argu- ment. e.g. of a sequence in HF. 81,22,...42q call it my- seq Write Hom,(V,W) without 3 having to-write: | $\mathrm(Hom}_k(V, W)$. Completely write any_en- 2 vironments without options as a command with two ar- guments Write a 2x2 matrix ae (b) Identify types of errors and how they occur in the following TX document extract. Rewrite a correct extract. (6 marks} \documentelass12pt,a4paper] {article} \\usepackage{amsmaths} \begin{document} Exrors & omissions in \LaTeX. Consider $8y=x"2\sina $$ The equation $2x=y describes a straight line. ee earansene 0 \end{document } 1 (c) Specify the packages required if any for the environment you defined in question 1c) (2 marks} QUESTION 3. (20 MARKS) (a) Tikz is an important package that can be used to draw a lot of shapes in TEX Write a code (from scratch) that will produce the following figure given that the radius of the circle is 1,5.amits «the sinaller dots (showing points) have 0.1 units radius (10 marks}N B41 pote mnfn 60} (100) Lon Figure 1: Some plane figures-‘on a dotted grid (b) Write a code (from scratch) that will draw the graph of y = 2?—2+3 for -2<2<3 as shown in the figure below (include the caption). Use \foreach command to show the points the curve interceets line z= —2,—1,0, 1,2,3 with 0.1 units circles, [10 marks} Figure 2: Graph of y = 2?—2+3 QUESTION 4. (20 MARKS) (@) Reproduce the I41}X code of the following extract. [12 marks} We sa that the rings R and S are isomorphic and write R © S. For example, Page 4‘The ring R= {m-+ny2: m,n € Z is isomorphic to the ring s-{(n ») mnez} (2) with the operations of matrix addition and‘multiplication, the isomorphism being gimanvi (3 *) 2n m, If S is a ring defined by/(2), then there is a monomorphism : Z—» R given by Let y : R—+ S be a homomorphism, where R and S are rings, with zero elements Op,0s, respectively, and let oa K = {a€ BR: y(a)= 0s}. : (3) We refer to Kas the kernel of y denoted by ker. | (b) Write ISTEX code to reproduce the table in question 1(b). Insert your-answers in the corresponding cells : [8 marks} QUESTION 5. (20 MARKS) Write a TEX code (from scratch) that will produce the sample document below. Use BibTeX. (20 marks} Page 5On regular prime graphs of nonsolvable groups Abstract ‘We study the simple graphs and character degree graphs of some finite nonsolvable group G. We will in particular determine which 1 aphs occur as a character di 1h_of some nonsoly- able group. 1 Introduction The character degree graph A(G) os a group G has as its vertex set the set p(G) of all the prime divisors of cd(G) = {x(1)|x € Irr(G)}. Irr(G) is the set of irreducible complex characters of G. This graph has been studied for more than 20 years now. M. Lewis and Q. Meng in [4], showed that if A(G) is a square, then G is a direct product of groups H and K with disconnected graphs of two vertices. It has been conjectured that A(G) is a noncomplete and regular graph if and only if G is the direct product of groups with the same property. 2 Previous results The following result will help us prove the Main Theorem. Lemma 2.1. [1, Lemma 5] Let N be a minimal normal subgroup of G so that = $1 x +++ x $4, where S; © $, a nonabelian simple group. If 8 € Irr(S) extends to Alt(S), then 0 x --- x 6 € Irr(N) extends to G. 1Proof. See [1] for the proof. a The following result due to Gallagher is very useful in the study of irreducible characters in the sense that it helps us identify Inr(G/N) with a subset of Irr(G) where N 1G. Theorem 2.2. [3, Corollary 6.17] Let N «1G and let x € Irr(G) be such that xn = 8 € Irr(N). Then the characters Bx for B € Irr(G/N) are irreducible, distinct for distinct f and are all ofthe irreducible constituents of 8°. In particu- lar, B(1)x(1) € ed(G) for all B € Irr(G/N). 3 Main Results Proof of Main Theorem. By classification of simple groups. All nonabelian simple groups lie in the following classes: (i) The alternating group Ay for n > 5 (ii) The 26 sporadic groups (iii) The groups of Lie type We consider each case independently... References [1] M. Bianchi, D. Chillag, etal. Character degree graphs that are complete graphs. Proc. Amer. Math, Soc., 135:671-676, 2007. [2] B. Huppert. Character theory of finite groups. Walter De Gruyter, 1998. [3] LM. Isaacs. Character theory of finite groups. Academic Press, 1976. [4] M.L. Lewis and Q. Meng. Square character degree graphs yield direct products. J. Algebra, 349:185-200, 2012. [5] C. P.M. Zuccari, Character degree graphs with no complete vertices. J. Algebra, 353:22-30, 2012.— _— te hat \gooe)! of , Azeee RAVE MASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2016/2017 FOURTH YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF BACHELOR OF SCIENCE WITH INFORMATION TECHNOLOGY MAIN CAMPUS MIT 401: BAYESIAN MODELLING Date: 9" December, 2016 ‘Time: 8.30 - 11.30 am ow, INSTRUCTIONS: - ek Sd Answer question ONE and any other TWO questions. © Observe further instructions on the answer booklet. % MASENO UNIVERSITY 180 9001:2008 CERTIFIED ST 3 QUESTION ONE (Compulsory) [30 Marks] (a) Briefly describe the Bayesian method of modelling. How is it different from the frequentist of probabilistic reasoning? ¥ (8 Marks) 1 (b) Describe the program structure of an R code/ (5 Marks) fo) How does the following R packages work in Bayesian Modelling? 2 L (i) bayesSurv (ii) MCMCpack \ 7 (iii) bayesm (9 Marks) (d) In a factory, Machines My(M, Ms are all producing springs of the same length. Machine Mi, Mz and My produce 1%,4% and 2% defective springs, respectively. Of the total production, machine M, produces 30%, Mz produces 25% and Ms produces 45%. : (i) Ia spring is selected at ratdom from the total springs produced in a given day, determine the probability that it is defective, P(D). (ii) Given that the selected spring is defective, find the conditional probability that it was produced (8 Marks) by machine Mz, P(Mz|D). QUESTION TWO = [20 Marks] (a) Lot X be a random sample of size. from a binomial distribution with parameter_p. The prior density function for p is a Beta distribution. Gea}. occa? a ae (i) Find the Baye's estimator for p. (ji) Ifa = f = 1, what is the Baye’s estimator for p. (10 Marks) (b) Three manufacturers supply clothing to a retailer. 60% of the stock comes from manufacturer 1, 30% from manufacturer 2 and 10% from manufacturer 3, 10% of the clothing from manufacturer Tis faulty,.5% from manufacturer 2 is faulty and 15% from manufacturer 3 is faulty. What is the probability that a faulty garment comes from manufacturer 3? — (5 Marks) (c) Under atmployment promotion programme, it is proposed to allow sale of newspapers on the -=2—" buses during off-peak hours, The vendor can purchasé the newspapers at B special concessional rate of Shs.26-per copy against theiselling price of Shs.40. Any unsold copies are, however, a dead loss. A vendor has estimated the following probability distribution for the number of copies demanded copies [ 15 [ 16 | 17 | 18 iB 20 prob [0.04 | 0.19 | 0.33 [0.26 | 0.1T [0.07 How many copies should he order s0 that his expected profit will be maximum? (5 Marks)QUESTION THREE (20 Marks] following function is based on the sieve of Eratosthenes, the oldest known systematic method for ‘The idea is as follows: begin with a vector of numbers isting prime numbers up to a given value n from 2 ton. Beginning with 2, eliminate all multiples of 2 which are larger than 2. Then move to the next nusnber remaining in the vector, in this case, 3. Now, remove all multiples of 3 which are larger than 3. Procoed through all remaining entries of the vector in this way. The entry for 4 would have been removed in the first round, leaving 5 as the next entry to work with after 3; all multiples of 5 would be removed at the next step and so on, Eratosthenes = function(n) { # Return all prime numbers up to n #(based on the sieve of Eratosthenes) if (m>=2){ Sieve = seq(2, n) primes = c() for (i in seq(2, n)) { if (any(sieve == i)) { primes = c(primes, i) sieve = c(sieve[(sieve %% i) != 0], i) + ? return (primes) } else { ‘ stop("Input value of n should be at least 2.") + - (i) Does the Eratosthenes() function work proper! required in this case? (ii) Use the idea of the Eratosthenes() function to prove that there are infinitely many primes t a larger value n that would not be ly if n is not an integer? Is an error message Hint: Suppose all primes were less than m, and construct eliminated by the sieve. QUESTION FOUR [20 Marks] (4) We are interested in the mean, A, of a Poisson distribution. We have a prior distribution for \ with \ density SA) = ko(1 + A)e A>0 we g Find tho value of fy - Q bo(tar€ {| (i) Find the value of ky (i GrWe hee! Diag (ii) Pind the prior mean of A y been ce tC) = (iii) Find the prior standard deviation of 4 (0) We observe data z1,....5 where, given A, these are independent observations from the Poisson( A) distribution ls (B,.) Vie 2 ") 4 (i) Find the likelihood. L(® We @ Rm oe(ii) Find the posterior density of A. (iii) Find the posterior mean of A (c) Im each of the following, determine the final value of “answer” Lu ansver = 0 @® for (j in 1:5) answer = answer + j (ii) answer <- NULL for (j in 1:5) answer = c(answer, j) (iii) answer = 0 for (j in 1;5) answer= c(answer, j) (iv) answer = 1 for (j in 1:5) answer =, answer * j (v) answer = 3 for (j in 1:15) answer = c(answer, (7 * answer[j]) %% 31) QUESTION FIVE ‘The Fibonacci sequence is a famous set [20 Marks] quence in Mathematics. The first two elements are defined as 1.1]: Subsequent elements are defined as the sum of the preceding two elements, For example, the third eq preceding clement is 2(=1+1), the fourth element is 3 (=1+2), the fifth element is § (=2+3),and so on, ‘To obtain the first: 12 Fibonacci numbers in R, we can use fibonacci=numeric(12) fibonacci [1] =fibonacci [2)=1 for (i in 3:12) Fibonacci [i] =fibonacci [i-2]+ fibonacei [i-1) Modify the code to generate the Fibonacci sequence in the following ways: (a) Change the first two elements to 2 and 2. (b) Change the first two elements to 3 and 2. (©) Change the update rule from summing successive ele "ments to taking differences of successive ele ments. For example, the third element is defined as the second-element minus the first element, and 80 on, (4) Change the update rule so that each clement is defined as the sum of thres preceding elements. Set ment as 1 in order to start the =e Process,ESF MASENO UNIVERSITY UNIVERSITY EXAMINATIONS 2019/2020 FOURTH YEAR FIRST SEMESTER EXAMINATIONS FOR THE DEGREE OF BACHELOR OF SCIENCE AND BACHELOR OF EDUCATION WITH INFORMATION TECHNOLOGY __ MAIN CAMPUS MMA 405: PARTIAL DIFFERENTIAL EQUATIONS I Date: 2" December, 2019 Time: 8.30 - 11.30 am INSTRUCTIONS: ¢ Answer question ONE and any other TWO questions ¢ Show all the necessary workings © Observe further instructions on the answer booklet MASENO UNIVERSITY 10 9001:2008 CERTIFIED ©}QUESTION ONE (COMPULSORY) (30mks) (a) Define SE, hence find the following ratio AFG) (FG), (F.C) =) as 8u.2) ° (2,2) A(e,y) where J° and G are defined below: F(a,y,z) = ax? + by? +.cz2-1=0 Gyz)=a+yt2- (Smks] (b) Show that the equation (2x? + 2xy + 2x2? + de + dy + 2zdz = 0 is integrable, hence find its primitive. [10mks] (c) Find the complete integral of the equation op + 3yq — 22 + 2r7q? =0 _{8mks]_ “(A Use Jacobi's method to find the complete integral of the equation pyres + 3pox5 + p}ps = 0 [7mks] QUESTION TWO (20mks) (a) Find the equation of the integral surface of the PDE 2y(z— 3)p + (22 — 2)q = y(2x — 3) which passes through the circle z= 0, 22+ y? = 2x (8mks} (b) Show that the curve « = 1, 7 equation: y is not a characteristic of the 0: 3 25g tude? + EE = 22st +) hence find the integral surface through the parabola, (12mks}QUESTION THREE (20mks) (a) Find the integral curves of the equation = % = -4, — [10mks] (b) Form a partial differential equation by eliminating the arbitrary ~~ —eonstants fromthe equation Z= (ea) —— . [l0mks]_ QUESTION FOUR (20mks) (a) Show that the PDE zp = yq and 2(zp +yq) = 2zy are compatible and hence find its solution. [10mks} (b) Use Cauchy’s method of characteristics to determine the integral sur- face of the equation pg + yg? = 1 which passes through the straight line z=2, y=0. (10mks} 7 {SERSTION EIVE (20mks) (a) Solve (i) yp — 2xy = Ing [4mks] (ii) 2x2 ~ pa? — 2xyq + pq =0 [6mks] (b) Verify that the equation z+ y?)de + 2(2 +2?)dy — zy(x + y)dz =0 is integrable, hence find its primitive. Hint: (i) Let y = constant (ii) Letz=1 ~ —— (iii) Then eliminate z between (i) and (ii)MASENO UNIVERSITY UNIVERSITY EXAMiNATIONS 2017/2018 FOURTH YEAR FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF SCIENCE AND BACHELOR OF EDUCATION SCIENCE WITH INFORMATION TECHNOLOGY MAIN CAMPUS MMA 405: PARTIAL DIFFERENTIAL EQUATIONS I Date: 13" March, 2018 ‘Time: 8.30 - 11.30am INSTRUCTIONS: * Attempt Question ONE and any other TWO. « Show all the necessary workings ¢ Observe further instructions on the answer booklet MASENO UNIVERSITY 1SO 9001:2008 CERTIFIED 6(x rereon) (see) = 24) [Question One, 30mks] Sax) (a) Solve the following equation a ( 1 pe) (4 *) y6~ Ys = (asks) ABY Verity chat the following equation is integrable and find its primitive (2 + 2?) cosuda ~ (2 + 2)dy + (1 - 2?)(y — sinxe)dz = 0 [Smks} (c) Form the partial differential equation by eliminating the arbitrary \ function from 2 = exp(2x + 3y)f(2e ~ 3y) > (d) Find the integral surface of the equation (y — 2) {2ayp + (2? - y? Ya} + (a? -¥) =| 2th9) sz) e 4) through the curve r=, y=0, 2=0° 2 Se 3 , zat (7rmks| ~ ; e-PRO Fa Show that-the equation 9 Sa — Cr toe = Vand (pt + gx = pe ate coyatible and hence find its solu rites (Up eG 7 x [Question TWO, 20mks}——— 44 fet r (a) Form e partial differential equation by éliminating the arbitrary: constants trom theyequati gh UP ate (2 a > = he err)s 2Yu -sax) | % Vs ) (rele mo VA s(h9 ae os ie ‘ sai } ( dy, Ce dennl% % i, oa ere (hardly sex)(b) Find the solution of (2? =I p+ryy ty which is zero on the positive yoaxcis. [13mies} (a) Find the characteristics of the equation and hence, determine the integral surface which passes through the parabola « = 0, y? = ‘omks} @ Using charpit’s n othod, find the compiete integral of [LOurks} [Question Four, 20mks] Mes Jacobi method to find complete es vf the following equations 4 P% XX. Dy (i) pipaps + pemecged =0 WE aR CARY HX Mims} ——— (ii) PuPaps = (10mks} 1 LoXy AR, odh - 2 Ab = dh idm = AP [Question Five, 20mks IBY. (Piano re Find the integral surface of the equation whet AP, / “Fe a elm + y)p— y(e bua — 260 —y) = uf : : pe ae which passes through #? 4s? =a. y= 1 ENI