Suppose that Thomas Lee's insurer views him as having the following loss distribution: ($6000000 with probability...
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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)
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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
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