Suppose that Kate and Anne enter into a pooling arrangement. Assume that both women have the following loss distributions and that losses are independent.

Loss = $40,000 with probability 0.02

$5,000 with probability 0.06

$0 with probability 0.92

1. Write out the possible outcomes and the probability of each outcome for Kate and Anne after they enter into a pooling arrangement. That is, write out the probability distribution for each of the women after they enter into a pooling arrangement. Hint: the sum of the probabilities should equal to 1 (i.e. 100%) if you have considered all possible combinations.