Rhoda Ruyner owns a $200,000 home and has a 2 chance of experiencing a loss that destroys her home in any given year Assume that only one loss per year can occur and that if a loss occurs, her home is totally destroyed Suppose that Rhoda purchases a full insurance contract from Acme Insurance for a...

1 Actual faia premium probability ...

Rhoda Ruyner owns a $200,000 home and has a 2% chance of experiencing a loss that destroys

Fantastic news! We've Found the answer you've been seeking!

Rhoda Ruyner owns a $200,000 home and has a 2% chance of experiencing a loss that destroys her home in any given year. Assume that only one loss per year can occur and that if a loss occurs, her home is totally destroyed. Suppose that Rhoda purchases a full insurance contract from Acme Insurance for an actuarially fair premium. This contract would pay losses due to the total destruction of Rhoda’s home. Assume that Rhoda’s contract is the only insurance contract that Acme Insurance sold. What is the actuarially fair premium that Acme Insurance will charge Rhoda in the coming year? Show all calculations.