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5. Suppose your EU-w5, and insurance is sold at twice the actuarially fair rate Your uninsured...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $600 million. The probability of loss is 1.31 percent in one year, and the relevant discount rate is 4.2 percent. a. What is the actuarially fair insurance premium? (Do not round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $390 million. The probability of loss is 1.29 percent in one year, and the relevant discount rate is 3.1 percent. a. What is the actuarially fair insurance premium? (Do not round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $630 million. The probability of loss is 1.43 percent in one year, and the relevant discount rate is 4.6 percent. a. What is the actuarially fair insurance premium? (Enter your...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $250 million. The probability of loss is 1.32 percent in one year, and the relevant discount rate is 3.2 percent. a. What is the actuarially fair insurance premium? (Do not round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $245 million. The probability of loss is 1.25 percent in one year, and the relevant discount rate is 4 percent. a. What is the actuarially fair insurance premium? (Do not round...
hapter 9 Suppose you'll have an annual nominal income of S40,000 for inflation rate is 5...
hapter 9 Suppose you'll have an annual nominal income of S40,000 for inflation rate is 5 percent per year a. Find the real value of your $40,000 salary for each of the next 3 years. each of the next 3 years, and the Suppose you have a COLA (Cost of Living Adjustment) of 5 percent per year in your contract, which raises your $40,000 salary by 5 percent for each of the next 3 years. Given the 5 percent inflation...
Suppose that leather is sold in a perfectly competitive industry. The industry short-run supply curve (marginal...
Suppose that leather is sold in a perfectly competitive industry. The industry short-run supply curve (marginal cost curve) is P = MC = 3Q. The demand for leather hides is given by Q = 60 − P. a. Find the equilibrium market price and quantity. b. Suppose that the leather tanning releases bad stuff into waterways. The external marginal cost is $5 per unit. Calculate the socially optimal level of output and price for the tanning industry. c. What are...
Suppose that leather is sold in a perfectly competitive industry. The industry short-run supply curve (marginal...
Suppose that leather is sold in a perfectly competitive industry. The industry short-run supply curve (marginal cost curve) is P = MC = 3Q. The demand for leather hides is given by Q = 60 − P. a. Find the equilibrium market price and quantity. b. Suppose that the leather tanning releases bad stuff into waterways. The external marginal cost is $5 per unit. Calculate the socially optimal level of output and price for the tanning industry. c. What are...
Suppose the function u(x) = x0.5 , where x is consumption, represents your preference over gambles using an expected uti...
Suppose the function u(x) = x0.5 , where x is
consumption, represents your preference over gambles using an
expected utility function.
You have a probability 0.1 of getting consumption xB (bad state)
and a probability 0.9 of getting xG (good state).
An insurance company allows you to choose an insurance contract
(b, p), where b is the insurance benefit the company pays you if
the bad state occurs and p is the insurance premium you pay the
company regardless of...
1. Bob does not have insurance. When Bob is sick his income is IS=$0. When Bob...
1. Bob does not have insurance. When Bob is sick his income is IS=$0. When Bob is healthy his income is IH=$40,000. Bob’s probability of getting sick is p=0.25. a.) What is Bob’s expected income without insurance? b.) Plot Bob’s IS, IH, and E[I] in the “Utility-Income” space and in the “IS-IH” space. Label all aspects of the graphs, including the coordinates of all important points. c.) What is the slope of Bob’s Zero-Profit Line? 2. Assume Bob is offered...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $390 million. The probability of loss is 1.29 percent in one year, and the relevant discount rate is 3.1 percent. a. What is the actuarially fair insurance premium? (Do not round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $250 million. The probability of loss is 1.32 percent in one year, and the relevant discount rate is 3.2 percent. a. What is the actuarially fair insurance premium? (Do not round...
In calculating insurance premiums, the actuarially fair insurance premium is the premium that results in a zero NPV for both the insured and the insurer. As such, the present value of the expected loss is the actuarially fair insurance premium. Suppose your company wants to insure a building worth $245 million. The probability of loss is 1.25 percent in one year, and the relevant discount rate is 4 percent. a. What is the actuarially fair insurance premium? (Do not round...
hapter 9 Suppose you'll have an annual nominal income of S40,000 for inflation rate is 5 percent per year a. Find the real value of your $40,000 salary for each of the next 3 years. each of the next 3 years, and the Suppose you have a COLA (Cost of Living Adjustment) of 5 percent per year in your contract, which raises your $40,000 salary by 5 percent for each of the next 3 years. Given the 5 percent inflation...
Suppose the function u(x) = x0.5 , where x is
consumption, represents your preference over gambles using an
expected utility function.
You have a probability 0.1 of getting consumption xB (bad state)
and a probability 0.9 of getting xG (good state).
An insurance company allows you to choose an insurance contract
(b, p), where b is the insurance benefit the company pays you if
the bad state occurs and p is the insurance premium you pay the
company regardless of...
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