Losses from a line of insurance follow a Pareto distribution with a = 2 and 0 = 2000. It is found that the loss sizes are inflated by 4% uniformly, and the insurer changes the policy terms so that it will pay 80% of each loss after applying a $100 deductible subject to a maximum covered loss of $5,000. Calculate the insurer's expected payment per loss after the inflation, correct to two decimal places.

Losses from a line of insurance follow a Pareto distribution with a = 2 and 0 = 2000. It is found that the loss sizes are inflated by 4% uniformly, and the insurer changes the policy terms so that it will pay 80% of each loss after applying a $100 deductible subject to a maximum covered loss of $5,000. Calculate the insurer's expected payment per loss after the inflation, correct to two decimal places.

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Description: (a) Losses from a line of insurance follow a Pareto distribution with a =2 and 0 = 2000. Itis found that the loss sizes are inflated by 4% uniformly, and the insurer changes thepolicy terms so that it will pay 80% of each loss after applying a $100

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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