1. An insurer sells a very large number of policies to people with the following loss...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. An insurer sells a very large number of policies to people with the following loss distribution: $100,000 with probability 0.005 $ 60,000 with probability 0.010- Loss $20,000 with probability 0.020 $ 10,000 with probability 0.05 $ 0 with probability 0.915 = a. Calculate the expected claim cost per policy. b. Assume claims are paid one year after premiums are received and that the in- terest rate is 6 percent. Calculate the dis- counted expected claim cost per policy. c. Assume that the only administrative cost is the cost of processing an application, which equals $100 per policy, and that the fair profit loading is $50. What is the fair premium? 2. Redo problem 1, but include the expected cost of loss adjustment expenses (the cost of processing claims), assuming that loss ad- justment expenses equal 12 percent of losses and are paid at the same time that claims are paid. 1. An insurer sells a very large number of policies to people with the following loss distribution: $100,000 with probability 0.005 $ 60,000 with probability 0.010- Loss $20,000 with probability 0.020 $ 10,000 with probability 0.05 $ 0 with probability 0.915 = a. Calculate the expected claim cost per policy. b. Assume claims are paid one year after premiums are received and that the in- terest rate is 6 percent. Calculate the dis- counted expected claim cost per policy. c. Assume that the only administrative cost is the cost of processing an application, which equals $100 per policy, and that the fair profit loading is $50. What is the fair premium? 2. Redo problem 1, but include the expected cost of loss adjustment expenses (the cost of processing claims), assuming that loss ad- justment expenses equal 12 percent of losses and are paid at the same time that claims are paid.
Expert Answer:
Answer rating: 100% (QA)
Calculation without Loss Adjustment Expenses a Calculate the expected claim cost per policy Expected ... View the full answer
Related Book For
Introduction To Probability And Statistics
ISBN: 9781133103752
14th Edition
Authors: William Mendenhall, Robert Beaver, Barbara Beaver
Posted Date:
Students also viewed these accounting questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Jan Flenderson, marketing manager at Awesome Bits Games (ABG), was starting to get worried. The Kickstarter crowdfunding campaign for the latest company board game, Undead Rising, had gone live at 3...
-
Suppose that two linear equations are graphed on the same set of coordinate axes. Sketch what the graph might look like if the system has the given description. (a) The system has a single solution....
-
How many kilocalories are generated when the brakes are used to bring a 1200-kg car to rest from a speed of 95 km/h?
-
Another alternative fuel to be seriously considered is hydrogen. It can be produced from water by various techniques that are under extensive study. Its biggest problem at the present time is cost,...
-
Describe the global growth of stock markets.
-
You are the Partner-in-Charge of a large metropolitan office of a regional public accounting firm. Two members of your professional staff have come to you to discuss problems that may affect the...
-
Tax Brackets for Salary and Interest Income Dividend Tax Treatment 0 to $ 1 5 , 0 0 0 $ 1 5 , 0 0 1 to $ 3 0 , 0 0 0 $ 3 0 , 0 0 1 to $ 7 0 , 0 0 0 $ 7 0 , 0 0 1 to $ 1 1 0 , 0 0 0 $ 1 1 0 , 0 0 1 to...
-
Using the results of Example 5.1, verify that the mode shapes satisfy the following relations, known as orthogonality relations: Data From Example 5.1:- Figure 5.6:- \(\vec{X}^{(1)^{T}}...
-
Which statement best applies to an organization's restricted fund(s)? Restricted funds are created when you acquire physical capital assets that the company owns Restricted funds are usually found in...
-
A few years ago, the Nordstrom's Clothing Store in downtown Anchorage closed. Many people believe that Nordstrom sells a style of clothing that isn't sold by other stores in Anchorage, which is why...
-
Company XYZ has a current stock price of $39.43 and is not expected to pay dividends in years 1, 2 and 3. it is expected to pay a dividend of S8 four years from today. After year 4, dividends are...
-
Utilise supply chain management systems and resources to achieve organisational objective by completing the following activities: Draw up strategic objectives are transformed into a supply chain...
-
We can be 95% confident that the true proportion of people who own a cell phone have higher total expenditure than persons who do not own a cell phone is between 79.70% to 91.93%. Proportion...
-
Jane is considering two projects both of which have an initial cost of $20,000. The cash inflows of project A are $3,000, $6,000, $12,000, and $15,,000 over the next four years, respectively. The...
-
2.2 [2 pt] Write a function called flatten_slice_and_multiply that has two inputs called Matrix1 and Matrix2 where each is represented as a numpy array. The function should reshape Matrix2 so that it...
-
QUESTION 9 HC-O-C-R R-C-O-CH HC-O-P-O-CH-CH-NH3* O || O a. Phosphatidic acid, Serine O b. Lysophosphatidic acid, Serine, Free FA O c. Lysophosphatidylserine, Free FA O d. 2 Free FAs, Serine, Glycerol...
-
Find a (1 - ) 100% confidence interval for a population mean for these values: a. = .01, n = 38, = 34, s2 = 12 b. = .10, n = 65, = 1049, s2 = 51 c. = .05, n = 89, = 66.3, s2 = 2.48
-
Three students are playing a card game. They decide to choose the first person to play by each selecting a card from the 52-card deck and looking for the highest card in value and suit. They rank the...
-
The scores on a national achievement test were approximately normally distributed, with a mean of 540 and a standard deviation of 110. a. If you achieved a score of 680, how far, in standard...
-
The following financial information is taken from the annual report of Intel Corporation: Using the above data, calculate the companys inventory turnover, inventory-on-hand period, and gross profit...
-
At year end, Riverside Corporation announced that it would change its inventory valuation method from last-in, first-out (LIFO) to first-in, first-out (FIFO). The company also disclosed that the...
-
Exhibits 6.3, 6.4, and 6.5 in Chapter 6 present the financial results of the Arizona Ice Cream Company, Inc., using FIFO, LIFO, and the weighted-average cost method, respectively. Using this data,...
Study smarter with the SolutionInn App