An insurer sells a very large number of policies to people, Ask an Expert

Finance

An insurer sells a very large number of policies to people with the following loss distribution:
$100,000 with probability 0.005
$ 60,000 with probability 0.010
Loss = $ 20,000 with probability 0.020
$ 10,000 with probability 0.05
$ 0 with probability 0.915

a. find out the expected claim cost per policy.
b. Assume claims are paid one year after premiums are received and that the interest rate is 6 percent. find out the discounted expected claim cost per policy.
c. Assume that the only administrative cost is the cost of processing an application, which equals $100 per policy, and that the fair profit loading is $50. What is the fair premium?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M926877

Have any Question?Write your Review or question?

Related Questions in Basic Finance

Question -discuss the incremental impact of a hypothetical

Question - Discuss the incremental impact of a hypothetical, but reasonable, simple new investment project, such as a new product or facility or a cost-cutting investment, as an initial step in thinking about the future. ...

What is the present value of a bond with a par value of

What is the present value of a bond with a par value of $1,000 and a 4.5% coupon rate that is paid semi-annually for 10 years at 5% interest? (round to the nearest dollar)

Is there a way to protect and secured the file with a

Is there a way to protect and secured the file with a password, checked compatibility, and removed inappropriate information on Powerpoint?

If the rate of inflation is 43 what nominal interest rate

If the rate of inflation is 4.3%?, what nominal interest rate is necessary for you to earn a 2.8 %real interest rate on your? investment? ?(Note: Be careful not to round any intermediate steps less than six decimal? plac ...

Your company has an opportunity to invest in a project that

Your company has an opportunity to invest in a project that is expected to result in after-tax cash flows of $16,000 the first year, $18,000 the second year, $21,000 the third year, $24,000 the fourth year, $28,000 the f ...

What are the ways that it can help comply with legal

What are the ways that IT can help comply with legal requirements and social responsibilities surrounding the sales of alcohol?

Have the federal governments policies on drugs and

Have the federal government's policies on "drugs" and "narcotics" been successful?

What do you think is the most important factor in

What do you think is the most important factor in developing a successful agile transformation? Why? What do you think are three most critical factors in a change management initiative? Why?

Tactical operational exercises incorporate making

Tactical operational exercises incorporate making resolutions in a model of business management. What aspect does tactical operations NOT cover?

You want to invest in a stock that pays 5 annual cash

You want to invest in a stock that pays $5 annual cash dividends for the next four years. At the end of the four years, you will sell the stock for $20. If you want to earn 12% on this investment, what is a fair price fo ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert