Question: 1.Consider that Emily and Samantha face the same probability distribution for losses.Assume their claims are independent.The loss distribution is Loss amount . probability 0 .7

1.Consider that Emily and Samantha face the same probability distribution for losses.Assume their claims are independent.The loss distribution is

Loss amount . probability

0 .7

1000 .2

4000 .1

a.Calculate Emily's expected loss and variance

b.If Emily and Samantha form a pool in which losses are shared equally, calculate the expected loss per person, and the expected variance in losses per person.(hint: you first have to calculate the possible loss outcomes in the pool,divide by 2 to get the losses per person, and calculate the associated probabilities.)

c.What happened to expected losses per person and variance in losses per person when the pool was formed?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

After taking business classes, Jake, an avid dog-lover, decided to start selling unique pet supplies at trade shows. He has two products: Product 1: "Launch-it"- a tennis ball thrower that will sell...

Consider that Emily and Samantha face the same probability distribution for losses. Assume their claims are independent. The loss distribution is Loss amount. probability 0 1000 4000 7 .2 .1 a....

You helped me a couple of weeks ago. I was wondering if i could setup a time for tomorrow that you could be available to help me with some questions. I will pay $20 per question. They are short and I...

You perform a hypothesis test at the .05 level of significance. Your computed p-value turns out to .042. What is your decision about the hypothesis? You would accept Ho You would reject Ho You would...

COVID-19: The Global Shutdown In the first months of 2020, a pandemic overwhelmed the world. COVID-19, commonly known as the coronavirus, spread from China and created a severe public health...

uestion: 1. IN A STOCK ACQUISITION ACCOUNTED FOR BY THE EQUITY METHOD, A PORTION OF THE PURCHASE PRICE OFTEN IS ATTRIBUTABLE TO GOODWILL OR TO SPECIFIC ASSETS OR LIABILITIES. HOW OR UNDER WHAT BASIS...

Examine the pricing strategies in the gasoline market. Make sure to address the following topics: In the article, (Mixed) Strategy in Oligopoly Pricing: Evidence from Gasoline Price Cycles Before and...

(Java) BabyName and BabyNameData NEW ANSWER PLEASE (OTHER SIMILAR ONES AREN'T THE SAME) For this problem, you will use data from the U.S. Social Security Administration to analyze the most popular...

Each program is to be submitted in a separate file with the file name being the class name with extension .java as shown below. I only need the source file. GeneralAverage.java All answers will be...

Write a program where main reads in one word names from a file placing a reference to each new object into an ArrayList called names. (Be sure to ask for the name of the input file interactively.)...

Let P(x) = 10x7 - 2x + 5x5 + x - 7x - 1. (a) Find the possible number of positive real zeros of P(x).

Javier and Ercilia are supervisors at a shopping mall. Each was given the task of estimating the mean distance that shoppers live from the mall. They each randomly surveyed 100 shoppers. The samples...

Which one of the following statements about book value per share is most correct? A market price per common share that is geater than bock value per common share is an indication of an overvalued...

A company has $260,000 to invest in either Project Q or Project R. The expected cash flows are: YearProject QProject R 1$85,000$30,000 2$85,000$50,000 3$85,000$95,000 4$85,000$165,000 5$85,000$70,000...