The company cannot predict whether the pandemic death rate will stay stable. Set the speed to 29, then a Monte Carlo simulation that for each ofB=10000

iterations:

• randomly changesp
• by adding a value between -0.01 and 0.01 withsample(seq(-0.01, 0.01, length = 100), 1)
• uses the new randomp
• to generate a sample ofn=1,000
• policies with premiumxand loss per claiml=150000
• returns the profit overn
• policies (sum of a random variable)

(IMPORTANT! If you use R 3.6 or later, you will need to use the commandset.seed(x, sample.kind = "Rounding")instead ofset.seed(x). Your R version will be printed at the top of the Console window when you start RStudio.)

The outcome should be a vector ofB

total profits. Use the results of the Monte Carlo simulation to answer the following three questions.

(Hint: Use the process from lecture for modeling a situation for loans that changes the probability of default for all borrowers simultaneously.)

What is the probability of losing more than $1 million?