Finance School of management Managing Risk Transfers of risks through financial system Ⅰ surance policies o The flow of funds bundled with the flow of risks Finance $100,000 to start a business $70,000 from an investor in equity capital in return for a 75%o share of the profits $30,000 from a bank, at an interest rate of 6% per year The flow of funds unbundled with the flow of risks guaranteed loan uesTc 1616 Finance School of Management Managing Risk ❖ Transfers of risks through financial system – Insurance policies ❖ The flow of funds bundled with the flow of risks – Finance $100,000 to start a business – $70,000 from an investor, in equity capital in return for a 75% share of the profits – $30,000 from a bank, at an interest rate of 6% per year ❖ The flow of funds unbundled with the flow of risks – A guaranteed loan