Based on the past experience, the insurer observes that 85% of polices incur no loss and...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Based on the past experience, the insurer observes that 85% of polices incur no loss and the remaining 15% of polices result in claims which are normally distributed with average claim 6000 and variance 6 250 000. 14 400 polices were sold at the gross price of 1208,12 for each policy. The gross premium contains a load of 25% for insurer's acquisition costs and administrative expenses. Calculate probability that the gross premium will suffice to meet all claims and expenses. Assume that the no-claim ratio of 15% holds. A table below contains several values of probability function of the standard normal distribution: Z 0,385 0,454 0,524 0,598 0,675 F(z) 0,650 0,675 0,700 0,725 0,750 0,755 0,775 0,842 0,935 0,800 0,825 Based on the past experience, the insurer observes that 85% of polices incur no loss and the remaining 15% of polices result in claims which are normally distributed with average claim 6000 and variance 6 250 000. 14 400 polices were sold at the gross price of 1208,12 for each policy. The gross premium contains a load of 25% for insurer's acquisition costs and administrative expenses. Calculate probability that the gross premium will suffice to meet all claims and expenses. Assume that the no-claim ratio of 15% holds. A table below contains several values of probability function of the standard normal distribution: Z 0,385 0,454 0,524 0,598 0,675 F(z) 0,650 0,675 0,700 0,725 0,750 0,755 0,775 0,842 0,935 0,800 0,825
Expert Answer:
Answer rating: 100% (QA)
The question is asking us to calculate the probability that the gross premium will suffice to m... View the full answer
Related Book For
Posted Date:
Students also viewed these mathematics questions
-
For randomly selected adults, IQ scores are normally distributed with a mean of 100 and a standard deviation of 15. A sample of 24 randomly selected college professors resulted in IQ scores having a...
-
Assume that foot lengths of women are normally distributed with a mean of 9.6 in. and a standard deviation of 0.5 in., based on data from the U.S. Army Anthropometry Survey (ANSUR). a. Find the...
-
At a certain college, GPAs are normally distributed with a mean GPA of 2.48 and a standard deviation of 0.9. If the college wants to limit the number of academic suspensions to at most 15% of its...
-
If you were able to dictate economic policy, how would you strengthen the automatic stabilizers in this country? Why would your solutions work?
-
Leroy, who has a mass of 100 kg, is skateboarding at 9.0 m/s when he smacks into a brick wall and comes to a dead stop in 0.2 s. a. Show that his deceleration is 45 m/s2. b. Show that the force of...
-
1. Answer as best as possible: a. Three point-like charges are placed at the corners of a rectangle as shown in the figure, a = 28.0 cm and b = 68.0 cm. Find the minimum amount of work required by an...
-
The notes to financial statements present information on significant accounting policies, complex or special transactions, details of reported amounts, commitments, contingencies, segments, quarterly...
-
Beginning inventory, purchases, and sales for Item Foxtrot are as follows: Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) The cost of merchandise...
-
1 . Sep 2 , business bought $ 3 , 7 5 0 inventory from DC Penny Inc. paid in Cash 2 . Sep 6 , business bought $ 4 , 3 0 0 inventory from the TJB Inc. Term 1 / 5 , n / 3 0 FOB 3 . Sep 7 , Business...
-
Required: Nancy, who is 59 years old, is the beneficiary of a $220,000 life insurance policy. What amount of the insurance proceeds is taxable under each of the following scenarios? (Do not round any...
-
Question 1 A couple is planning to finance their 5 year old daughter's college education. They established a college fund that earns 10%, compounded annually. What annual deposit must be made from...
-
Discuss why the remote/rural economy doesn't produce enough jobs for residents. Why does most of the cash generated in remote areas never influence the local economy?
-
A developer puts in 5% equity and a fund puts in 95% of the equity for a development deal. Cash flow is to be distributed with the following order of priorities (e.g., "the waterfall"): Preferred...
-
Innovation always diffuses linearly with early adopters leading the way? Do you agree with this statement. If so, why. If not why?
-
. How much higher is the pressure in the center of the Sun compared to the outer edge of the outer core? 2 times 3 times 4 times 5 times 10 times.
-
A city is an aggregate of markets and submarkets. Each submarket is affected by the whole city, and each submarket affects, and in turn, is affected by other nearby submarkets". Elaborate and provide...
-
Build a cash flow table as given below using Microsoft Excel when all dollar values are in thousands. Make sure appropriate equations are used to calculate PVs and add all PVs to find NPV. Table 1...
-
The population of Detroit, Michigan, decreased from 1,027,974 in 1990 to 688,701 in 2013 (Source: U.S. Census Bureau). Find the average rate of change in the population of Detroit, Michigan, over the...
-
A popular theory in investment states that you should invest a certain amount of money in foreign investments to reduce your risk. The risk of a portfolio is defined as the standard deviation of the...
-
Assume that the populations are normally distributed. (a) Test whether 1 2 at the a = 0.05 level of signicance for the given sample data. (b) Construct a 95% condence interval about 1 - 2....
-
In Problem 9 from Section 11.2 we analyzed data in which an SUV crashed into the rear bumper of a car. Now we are going to reverse roles and allow the car traveling 10 miles per hour to collide into...
-
Partner A contracted with a vendor to buy a computer for the partnership. Partner A did not discuss the transac- tion with Partner B or get Partner B's approval. Partner B refused to approve payment...
-
Sherwin Corporation invest its excess cash in equity securities when such founds are not needed to support operations. At the beginning of the year the companys portfolio consisted of the following...
-
Amy Cardoza, Jeff Williams, and Claire Mangoni are partners in an existing music business. Each partner's equity is \($32,000,\) for a total equity of \($96,000.\) The partners agree to admit Russ...
Study smarter with the SolutionInn App