Question: Aggregate claims S are Compound Poisson with = 2 and severity distribution P ( X = 1 ) = 1 4 , P ( X

Aggregate claims S are Compound Poisson with =2 and severity distribution
P(X =1)=14, P(X =2)=34.
For a premium of P =6, an insurer covers aggregate claims and agrees to pay a dividend D equal to the excess, if any, of 75% of the premium over 100% of the aggregate claims. Determine the excess of premium over expected claims and dividends.
Hint: D = max{0,4.5 S}.

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