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Suppose Joe and Leo both face the following individual loss distribution:

Probability of Loss Amount of Loss

0.7 $0

0.2 $40

0.1 $60

Suppose that Joe and Leo enter into a pooling-of-losses arrangement. Just state what happens to the expected loss and variability of the expected loss as a result of the pooling arrangement (you don't need to find out).

Basic Finance, Finance

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  • Reference No.:- M946929

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