Consider that Emily and Samantha face the same probability distribution for losses. Assume their claims are...
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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. 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? 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. 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?
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Answer rating: 100% (QA)
To calculate Emilys expected loss we multiply each loss amount by its corresponding probability and ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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