Insurance Revision and hw check. Pair the halves of sentences: 1. It is important to keep the value of your policy 2. Make sure you get insured 3. When.

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Insurance Revision and hw check

Pair the halves of sentences: 1. It is important to keep the value of your policy 2. Make sure you get insured 3. When you say what you want your insurance to cover, 4. If an accident does happen, 5. If the company agrees to your claim, a) you make a claim to the insurance company. b) against accidents. c) you receive compensation. d) then the broker will tell you which policy you could take out. e) closely linked to the value of your property.

1. It is important to keep the value of your policy closely linked to the value of your property. 2. Make sure you get insured against accidents. 3. When you say what you want your insurance to cover, then the broker will tell you which policy you could take out. 4. If an accident does happen, you make a claim to the insurance company. 5. If the company agrees to your claim, you receive compensation.

Revision: fill in the missing prepositions face risk / face a risk ____ fire insure ______ risk / burglary / theft / injury to be covered _______ loss two parties ____ an insurance contract receive money ____ premiums pay money ____ compensation penetration ___ insurance worst year ___ record big number ___ insurance terms compared ____ $ 2000 ___ head exclusions ____ “acts ___ God” an analyst ___ Numis Securities / PBZ / CNB of against to in of on in to per forof at

HW: RB, p 68 Read: Lloyd’s tsunami exposure limited Explain the heading and following expressions: -unscathed -limited/minimal exposure -penetration of insurance (marketing) -insurance spent per head - exclusions for “acts of God” - the worst on record in terms of... -property claims -reinsure -softening of (premium) rates = not harmed or injured = the amount of money company risks losing = how much of a particular market insurance sales cover = insurance claims for property that has been damaged = falling because supply exceeds demand (→ a soft insurance market)

Comprehension check: True or false? In Indonesia & Thailand the penetration of insurance is high.T F The average insurance per head in the US is 30 times greater than the average in Sri Lanka.T F Lloyd’s will not lose a lot owing to the Asian tsunami. T F Insurance losses come close to economic losses caused by the Asian tsunami.T F The Asian tsunami of 2004 is likely to cost the global insurance industry less than one bad hurricane hitting Florida.T F Worldwide claims in 2004 surpassed all insurance losses recorded in the preceeding years.TF The insurance industry is still profitable as a result of soft premium rates.TF F F T F T T F

WHAT FITS HERE? domestic ~ stable ~ foreign ~ weak ~ hard ~ convertible ~ common ~ national ~ (ex)change ~ convert ~ (to) buy/sell ~ devalue/revalue ~ peg/fix ~ (to) ~ rises/falls ~ floats ~ fluctuates

one word fit all: CURRENCY (n.) Adjective + currency domestic ~ stable ~ foreign ~ weak ~ hard ~ convertible ~ common ~ national ~ Verb (vt*) + currency (object) (ex)change ~ convert ~ (to) buy/sell ~ devalue/revalue ~ peg/fix ~ (to) currency + verb (vi**) ~ rises/falls ~ floats ~ fluctuates *transitive – followed by a direct object **intransitive – no dir. object

Handout Exercise 1

Currencies the US dollar (USD / US$) the euro (EUR / €) the yen (JPY / ¥) the British pound (GBP / ₤) the kuna (HRK) the eurobut euros The dollar has slipped by around 3% against the yen and the euro since November. ______________________________________________________________________________________________________________________________________ Their house is now worth euros. ______________________________________________________________________________________________________________ For deposits in amount over USD , EUR or PLN

Handout Exercise 2 Exercise 3

Exchange rate is... (note: prepositions) the amount of one currency that can be bought with another –The exchange rate is 7.5 kunas to the euro. –The exchange rate is 5.7 kunas to the USD. the price at which one currency can be bought a rate at which one currency can be exchanged into / for another currency. value one currency in terms of other – € 1 = HRK 7.5 – the conversion rate of every € to HRK

Why do companies, institutions and people buy currencies? How is the value (the exchange rate) of the money in your pocked determined? Has the value HRK increased or decreased in the past few months? Has it increased or decreased since the summer? Why? Is the exchange rate of HRK fixed? What do we call this type of exchange rate? FLOATING Is it freely floating? Which institution supervises the exchange rate?

Revise: Functions of the Central Bank 1)__________ monetary _________ 2)commercial banks __________ 3)exchange rate ______________ 4)acting as a lender of ____ ________ implementing policy supervision lastresort

Types of exchange rate _______ exchange rate

Types of exchange rate Fixed exchange rate Floating exchange rate –Freely floating / clean floating e.r. –Managed floating / ________ floating e.r. dirty

Which of the three rates are described below? FIXED EXCHANGE RATE, MANAGED FLOATING E.R. or FREELY FLOATING E.R. 1. a rate which is set by the govt. (central bank) only a rate which is determined by the private market through supply and demand its value will decrease only if demand is low (and vice- versa) it does not change before it is centrally decided if the rate changes more than the central bank allows, the bank intervenes (buys or sells the currency) based on the free market only its value will rise only if demand is high a combination of the other two types example of intervention in the economy fixed e.r. freely floating e.r. fixed e.r. managed floating e.r. freely floating e.r. managed floating e.r. fixed; managed floating e.r.

Read EXCHANGE RATES, pg. 1 MK, U 26, p 128 and match with a heading After reading, complete the following paragraphs The Bretton-Woods Agreement of 1944 established ______ exchange rates, defined in terms of ______ and the US dollar. Between 1944 and 1971 many currencies were _______ ______ the US dollar, i.e. their parities with the US dolar were fixed. One US dollar was a promissory note issued by the US Tresury and could be exchanged for 1/35th of an ________ of gold. Under this system, fixed exchange rates could only be adjusted (revalued or _________) with the agreement of the ____________ _____________ _____________.

The Bretton-Woods system of gold __________ and pegging ________ the dollar was abandoned in 1971, because following inflation, the Federal Reserve did not have enough gold to _________ its currency. Say which: devalued or revalued An overvalued currency had to be __________. An undervalued currency had to be _________. Currencies could only be adjusted with the agreement of the ______.

Please, read pg. 2 & match with a heading Most western countries have had __________ exchange rates ever since This means that exchange rates are determined by the market ________ - the quantities _______ and ______. If demand exceeds supply, the price will ______; if supply exceeds demand, the price of a currency will _______. Milton Friedman, for example, was a __________ of freely floating exchange rates. He ________ that currencies would automatically settle at stable rates which would ______ underlying economic _________. However, proponents of freely floating exchange rates ____________ the impact of speculation.

Read pg. 3 & match with a heading PPP stands for _______ _______ ______. Purchasing power – the ability to buy things Parity – the state of being the same or equal If HRK and GBP have PPP, an amount of HRK needed to buy particular goods in Croatia will buy ________ amount of goods in the United Kingdom when exchanged into GBP. If floating exchange rates gave PPP, the cost of a given selection of goods would be the same in different countries. Floating exchange rates do not give PPP because of currency ____________. As much as ____% of world’s currency transactions are purely speculative.

Please, read pgs. 4 & 5 match with headings Match to create collocations used in pgs. 4&5 intervene currency reserves hedge contracts raw planning futures markets forward of the Euro export against currency fluctuations establishment materials foreign in exchange markets

Pg. 4 – Counteracting speculation Pg. 5 – Market interventions Match to create collocations used in pgs. 4&5 intervene in exchange markets hedge against currency fluctuations raw materials futures contracts forward planning export markets establishment of the Euro foreign currency reserves HW: MK, p 129 1)Comprehension (write questions) & Vocabulary 2)Watch the following video on PPP and answer the questions (next slide)

Watch and try to get answers to the following questions: PPP: What happens with the exchange rate in the very long run? What will countries do if they find that their goods and services have become very expensive? How will that affect the prices and exchange rates? What do we call this phenomenon? What is the law of one price?