Suppose that Thomas Lee's insurer views him as having the following loss distribution: ($6000000 with probability...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose that Thomas Lee's insurer views him as having the following loss distribution: ($6000000 with probability 0.01 $100000 with probability 0.02 with probability 0.03 with probability 0.94 Loss = $30000 $0 0 Claim payments are not expected to be paid until one year after the premium is received, the interest rate is 5% and the competitive loading equals 15% of expected claim costs. (a)(8%). What is the loading on the insurance policy from the insurer's perspective? (b)(7%). Suppose that Thomas Lee believes that her true probabilities for each possible loss outcome are half as high as the insurer has estimated. What is the loading on the insurance policy from Thomas Lee's perspective? (Note: This means Thomas Lee believes his probability for $0 loss is .97) Suppose that Thomas Lee's insurer views him as having the following loss distribution: ($6000000 with probability 0.01 $100000 with probability 0.02 with probability 0.03 with probability 0.94 Loss = $30000 $0 0 Claim payments are not expected to be paid until one year after the premium is received, the interest rate is 5% and the competitive loading equals 15% of expected claim costs. (a)(8%). What is the loading on the insurance policy from the insurer's perspective? (b)(7%). Suppose that Thomas Lee believes that her true probabilities for each possible loss outcome are half as high as the insurer has estimated. What is the loading on the insurance policy from Thomas Lee's perspective? (Note: This means Thomas Lee believes his probability for $0 loss is .97)
Expert Answer:
Related Book For
Finite Mathematics and Its Applications
ISBN: 978-0134768632
12th edition
Authors: Larry J. Goldstein, David I. Schneider, Martha J. Siegel, Steven Hair
Posted Date:
Students also viewed these accounting questions
-
You are not expected to cite case law but you must provide pinpoint references to the Companies Act 1993. (350-450 words) Background Gold Sport Ltd (Gold) is a leading supplier of sports equipment....
-
Suppose that the nominal interest rate before taxes equals 8 percent, the rate of inflation equals 3 percent, and the tax rate equals 25 percent. (a) Suppose that nominal interest is taxed. What are...
-
On January 1, 2012, Dawson, Incorporated, paid $100,000 for a 30% interest in Sacco Corporation. This investee had assets with a book value of $550,000 and liabilities of $300,000. A patent held by...
-
Is astrology scientific? The University of Chicago's General Social Survey (GSS) is the nation's most important social science sample survey. The GSS asked a random sample of adults their opinion...
-
A 1,200/240-V rms transformer has impedance 60 30 on the high-voltage side. If the transformer is connected to a 0.810 - load on the low-voltage side, determine the primary and secondary currents...
-
Casimer Gacioch began working for Stroh Brewery on February 24, 1947. When he began his work for Stroh, he was predisposed to alcoholism, but he had not yet become an uncontrolled alcoholic. Beer was...
-
Explain the difference between physical and logical schemas.
-
Sergio Flores works at the drive-through window of Big & Bad Burgers. Occasionally when a drive-through customer orders, Sergio fills the order and pockets the customers money. He does not ring up...
-
What are the FASB codifications regarding auction rate securities, collateralized debt obligations, fixed-for-float OTC gas swap, and auction rate securities?
-
E6-2B. Inventory Costing Methods-Periodic The following May data are for an item in Mary's inventory: unit. Method Mary Company uses the periodic inventory system. LO May 1 Beginning inventory, 150...
-
1. The velocity is a relative concept. We may be stationary with respect to plat- form's frame but we are moving with respect to a train's frame, leaving the platform. This question is about the...
-
Campogan was a licensed child care provider who cared for children in her home. She had a contract with Troy and Wendy Wurtz to care for their infant daughter, Zoe. The contract required Campogan to...
-
Allianz is a financial services company that sells a range of products, including life, health, property, and casualty insurance. In 2005, Jerry Mais bought his first product from Allianz and became...
-
The plaintiff, Aliaga Medical Center (Aliaga), opened a business checking account with Harris Bank on two occasions. On both occasions, Aliaga received the Harris Bank Handbook for Personal and...
-
(a) Study the nature of the velocity field arising from a pair of parallel vortex lines, with \(s_{1}=\) +1 and \(s_{2}=-1\), separated by a distance \(d\). Derive and discuss the general equation of...
-
In January 1983, Margaret Kawaauhau was treated by Dr. Paul Geiger for a foot injury. After examining Kawaauhau, Geiger prescribed oral penicillin to her despite his knowledge that intravenous...
-
As the President of for Chipper, what decision will you make? Be sure to include reasons for your decision ( using ethical / corporate social responsibility terminology ) . If you choose not to hire...
-
The National Collegiate Athletic Association (NCAA) and the National Federation of State High School Associations (NFHS) set a new standard for non-wood baseball bats. Their goal was to ensure that...
-
For what value of k will the three points (1, 5), (2, 7), and (3, k) be on the same line?
-
Refer to Exercises 3.2, Problem 9. How many crates of each cargo should be shipped in order to satisfy the shipping requirements and yield the greatest earnings? (See the graph of the feasible set in...
-
What value will be displayed when the Enter key is pressed? 1. 2. NORMAL FLOAT AUTO REAL RADIAN CL 1+P:0+Q: (P xor Q) and not( NORMAL FLORT AUTO REAL RADIAN CL 1+P:0+Q: (P and Q) or not (P
-
In problem 49, when does the estate's taxable year end? problem 49, John Henry died on May 1, 2018. When does his final 1040 have to be filed?
-
John Henry died on May 1, 2018. When does his final 1040 have to be filed?
-
John and Mary Hughes file their income tax return on a calendar year basis. John dies on May 15, 2018. Mary remarries on July 4, 2018. Can Mary file a joint return with John for the taxable year 2018?
Study smarter with the SolutionInn App