Question: Please be specific, answer all parts step by step, and show the formula you use. Thank you! 7. Consider the situation of an insurance company

Please be specific, answer all parts step by step, and show

Please be specific, answer all parts step by step, and show the formula you use. Thank you!

7. Consider the situation of an insurance company which offers personal injury policies to professional hockey players. The typical pavoffs to one of these policies are forecast to be the following: Pavoff -5,000,000 State Athlete is seriouslv niured Athlete is not injured seriousl Prob. 0.01 0.99 60,000 What is the expected profit per policy? Assuming the returns are uncorrelated policy to policy, how many policies must be sold in order for the standard deviation of the firm's overall portfolio of injury policies to be below $10,000

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