30.Determine the 0.95 confidence interval for S.A.O.Rouge. (a)(7.14%,8.16%) (b)(-0.76,15.56%) (c)(-8.92,23.72%) (d)(-17.08,31.88%) Answer:(c) Short Problems 1.Briefly distinguish between the three methods available to transfer risk:hedging,insuring and diversifying. Answer: Hedging:One is said to hedge a risk when the action taken to reduce one's exposure to a loss also causes one to give up the possibility of a gain. Insuring:Insuring means paying a premium to eliminate the risk of loss and retain the potential for gain. Diversifying:Diversifying means holding similar amounts of many risky assets instead of concentrating all ofyour investment in only one.Diversification thereby limits your exposure to the risk of any single asset. 2.Outline the steps in the risk-management process. Answer: The risk management process can be broken down into five steps: 1.Risk identification 2.Risk assessment 3.Selection of risk management techniques 4.Implementation 5.Review 10-910-9 30. Determine the 0.95 confidence interval for S.A.O. Rouge. (a) (7.14%, 8.16%) (b) (–0.76, 15.56%) (c) (-8.92, 23.72%) (d) (–17.08, 31.88%) Answer: (c) Short Problems 1. Briefly distinguish between the three methods available to transfer risk: hedging, insuring and diversifying. Answer: Hedging: One is said to hedge a risk when the action taken to reduce one’s exposure to a loss also causes one to give up the possibility of a gain. Insuring: Insuring means paying a premium to eliminate the risk of loss and retain the potential for gain. Diversifying: Diversifying means holding similar amounts of many risky assets instead of concentrating all of your investment in only one. Diversification thereby limits your exposure to the risk of any single asset. 2. Outline the steps in the risk-management process. Answer: The risk management process can be broken down into five steps: 1. Risk identification 2. Risk assessment 3. Selection of risk management techniques 4. Implementation 5. Review