Question 29 Which of the following is not a common type of property-related insurance that sensible businesses carry? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Floating premium Property loss Occupiers' liability Cc Bucinoro

Question 29 Which of the following is not a common type of property-related insurance that sensible businesses carry? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Floating premium Property loss Occupiers' liability Cc Bucinoro

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: The Basic Tools Of Finance

Section: Chapter Questions

Problem 5PA

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What is an actuarially fair insurance policy?
Irvine public school foundation offers an instrument rental program. The price to rent a cello forone school year is $400. If the instrument is damaged or lost, the student’s family is responsiblefor the cost of the instrument. IPSF offers Customer Assurance Program. For a fee of $60 peryear, IPSF will repair damaged instruments or replace lost or stolen instruments. Assume thatthe insurance is fair. Ella’s family has $2,000 and maximizes ?(?)=√?. If Ella’s family does notpurchase insurance, then its expected utility is 39.a. Will Ella’s family purchase insurance?b. What is the price of the instrument?
Can you answer part A and B please? I do not understand them. Thank you so much :) Part A. Suppose Rock earns $100,000 if he is healthy, and $80,000 if he falls ill. Suppose further that he has a 0.25% chance of falling ill. If Rock were to purchase full insurance, the payout would be equal to ____. The actuarially fair premium for this payout would be equal to ____. $100,000; $250 $50; $20,000 $70,000; $350 $20,000; $50 $350; $70,000 PART B: Suppose that there is a 20% chance Malik is injured and earns $100,000, and an 80% chance he stays healthy and will earn $500,000. Suppose further that his utility function is the following (utility = square root of income) �=�� Malik's utility if he earns $100,000 is ____ and his utility if he earns $500,000 is ____. Suppose that there is a 20% chance Malik is injured and earns $100,000, and an 80% chance he stays healthy and will earn $500,000. Suppose further that his utility function is the…
For each of the following kinds of insurance, give anexample of behavior that reflects moral hazard andanother example of behavior that reflects adverseselection.a. health insuranceb. car insurancec. life insurance
(80) purchases a whole life insurance policy of 100,000 payable at the end of the year of death. You are given: I. The policy is priced with a select period of one year. II The select mortality rate equals 80% of the mortality rate from the Standard Ultimate Life Table. III Ultimate mortality follows the Standard Ultimate Life Table. i=0.05 Calculate the actuarial present value of the death benefits for this insurance. A.58,950 B.59,050 C.59,150 D.59,250 E.59,350
A person's utility function is U = C1/2 . C is the amount of consumption they have in a given period. Their income is $40,000/year and there is a 2% chance that they'll be involved in a catastrophic accident that will cost them $30,000 next year. a. Calculate the actuarially fair insurance premium. What would your expected utility be if you were to purchase the actuarially fair insurance premium? b. What is the most you would be willing to pay for insurance, given your utility function?
Uncertainty and willingness to pay for insurance. Utility = (Wealth)1/3 Prob(flood) = .04 Prob(no flood) = .96 Total wealth if flood = $100,000. Total Wealth if no flood = $800,000. Find: (i) expected value, (ii) expected utility, (iii) certainty equivalent, and (iv) maximum willingness to pay for a policy that provides 100% flood insurance coverage. Draw the utility function and include all solved values on the diagram. What is the average gross profit per insurance customer, if each customer is charged his own maximum willingness to pay?
18.5 Suppose there is a 50–50 chance that an individual with log- arithmic utility from wealth and with a current wealth of $20,000 will suffer a loss of $10,000 from a car accident. Insur- ance is competitively provided at actuarially fair rates. Compute the outcome if the individual buys full insurance. Compute the outcome if the individual buys only partial insurance covering half the loss. Show that the outcome in part (a) is preferred. Now suppose that individuals who buy the partial rather than the full insurance policy take more care when driv- ing, reducing the damage from loss from $10,000 to $7,000. What would be the actuarially fair price of the partial policy? Does the individual now prefer the full or the partial policy?
Moral Hasard and Insurance The utility is U = W1/2 − 350S + 95S1/2 ; where W is wealth and S is care taken to avoid accidents. Probability of accident is 0.70 − S1/2 Wealth is ✩850,000 without accident and ✩300,000 with accident. Calculate S, EU and CE without insurance. Calculate S and EU with full insurance
Which of he following stalements about lhe Time Limil on Certain Defenses provision in an Accident and Heallh policy is CORRECT? A.It specifies the period of time after which an insurance company can deny a claim on he basis of the claim having pre-existed before the effective dale of coverage. B.It specifies the period of lime during which the insured must submit Proof of Loss. C.It prohibits legal actions against the insurance company after a specified period of time. D.It prevents an insurance company from maki any changes to a policy after il is issued.
A risk-averse individual experiences an adverse event with probability of 2% (0.02) that costs $1000. How much insurance coverage will the individual purchase if premiums are actuarily fair? a-some amount more than $1000 b-$1000 c-$0 d-some amount greater than $0, but less than $1000
Question content area Part 1 The potential market represents all active duty military members, allveterans, and their families. Assume that according to the United States Department of Defense, as ofDecember 31, last year there were 1 comma 361 comma 597 active duty personnel in all armed services.The veteran population totaled 21 million last year. Assuming the average cost of life insurance is $750 peryear and that potential customers purchase one policy per year, use the chain ratio method to calculatethe market potential for life insurance in the military market. Hint: see the Market Potential and SalesEstimates section of Appendix 3 Marketing by the Numbers in your textbook. Part 2 The number of buyersin the market can be estimated as 22,361, 597. (Round to the nearest whole number.) Part 3 Themarket demand is estimated as $16.77 million. (Round to the nearest whole number.)