The worth of consumer's house is 160, and her utility function is u(w) = √w. The probability of outbreak of fire is p = 1/2, and the fire will make 120 amount of loss of worth of house. Under the given conditions, consumer can join insurance that pay insurance money as B by pay insurance fee qB. (a) Find the amount of insurance that consumer will join. (b) Derive the condition that consumer will not join insurance. (c) Derive the condition that make consumer join full insurance. (d) Find the B, when the q is given as q = 3/5
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- You have a friend, Icahn Betitall, who just started a small business. He ispaying a hefty premium for insurance. Icahn’s insurance agent told himthat he is insuring against the risk of loss on fire, theft, liability, and businessinterruption. Icahn also has policies for life, health, and automobiles. Icahnis planning a trip to Las Vegas. He plans to contact his agent and obtain apolicy on the risk of losing his money at the blackjack table.a. What should you tell Icahn about being able to purchase such a policy?b. What are several methods that Icahn can choose to manage his risk exposurein Las Vegas?The probability distribution for damage claims paid by the Newton Automobile Insurance Company on collision insurance follows. Use the expected collision payment to determine the collision insurance premium that would enable the company to break even. The insurance company charges an annual rate of $520 for the collision coverage. What is the expected value of the collision policy for a policyholder? (Hint: It is the expected payments from the company minus the cost of coverage.) Why does the policyholder purchase a collision policy with this expected value?1. Which two types of natural disasters are not normally covered in a homeowner’s policy? 6. Kim just paid off her house and is thinking about no longer having homeowners insurance (her bank required it as part of her mortgage agreement). Her house is worth $300,000. What are the pros and cons of this decision? 7. Would your answer to the previous question change if you found out that Kim has $3,000,000 in the bank?
- Answer questions 3 to 4 based on the following information. Edwin faces two risks. They are car accident and plane crash, with the following loss amounts and probabilities of loss: Car accident Loss amount Probability 0.90 $ 2.000 0.07 $ 20,000 0.03 Plane crash Loss amount Probability $0 0.9999 $ 1,000,000 0.0001 What are the expected amount and standard deviation of loss for car accident? Select one: O a. Expected loss: $740 Standard deviation of loss: $3,425 O b. Expected loss: $740 Standard deviation of loss: $9,999 O. Expected loss: $2,000 Standard deviation of loss: $3,425 O d. Expected loss: $2,000 Standard deviation of loss: $9,999 Oe. None of the above Which of the following statements is correct? Select one: O a. In terms of standard deviation of loss, plane crash is riskier than car accident O b. In terms of standard deviation of loss, car accident is as risky as plane crash O . The expected loss of plane crash is higher than that of car accident O d. The expected loss of car…21) Your best friend's apartment has just been robbed, and he had no insurance. What would you suggest to your friend to better protect himself from such losses in the future? A) Purchase renter's insurance and add a personal articles floater. B) Take out personal property replacement cost coverage. C) Take a written and video tape inventory of your property. D) Only B and C above E) A, B, and C above 22) Suppose burglars trashed your apartment and stole your personal property. Your rent is $350 per month and you had to live in another apartment house for two months while the landlord had the apartment put back into livable condition. Under which section of an HO policy would you be covered and how much would you recover because of the move? A) Section I coverage C, $350 B) Section I coverage C, $700 C) Section I coverage D, $350 D) Section I coverage D, $700 E) Section II coverage, $350 23) On your home owners policy ________ protects any personal property that's owned or used by the…Your best friend's apartment has just been robbed, and he had no insurance. What would you suggest to your friend to better protect himself from such losses in the future? A) Purchase renter's insurance and add a personal articles floater. B) Take out personal property replacement cost coverage. C) Take a written and video tape inventory of your property. D) Only B and C above E) A, B, and C above
- Bob, risk manager from Travelers, mentioned that Travelers has the following two insurance programs, one for property coverage and one for liability coverage: I. Insurance program “A” is for liability coverage because Travelers is exposed to a high degree of professional liability risk so a low-deductible policy will protect the company from liability losses II. Insurance program “A” is for property coverage because Travelers owns a very valuable building and is concerned with the maximum probable loss of its property in a catastrophic event III. Insurance program “B” is for liability coverage because Travelers’ liability losses are relatively manageable so it saves the company insurance premiums by maintaining a larger deductible Bob, risk manager from Travelers, mentioned that Travelers has the following two insurance programs, one for property coverage and one for liability coverage: I. Insurance program “A” is for liability coverage because Travelers is exposed to a high…Chris, a good buddy or yours, is learning about personal automobile policies. He just received his policy from the insurance company. There is an item listed that he wants to take off because he doesn't think he needs it. This coverage will provide additional coverage that will pay his medical and property damage expenses above what someone else's policy pays. What policy is he referring to and does he need it? Question 6 options: Uninsured Motorist Coverage / No Uninsured Motorist Coverage / Yes Comprehensive Insurance / No Comprehensive Insurance / Yes Give typing answer with explanation and conclusionQ1. There are 2 buyers looking to purchase a house. The real estate agent calls the first buyer and asks what price they are willing to pay for the house (their “bid”). The agent then calls the second buyer, tells them what the first buyer’s bid is and then asks for the second buyer’s bid price. The agent then chooses the highest bid price as the successful buyer. In this game of 2 buyers: a) There is a first mover advantage (it is better to be called first) b) There is a second mover advantage (it is better to be called second) c) There is no advantage to being called either first or second. d) None of the above
- 46 Barney Farnsworth is unable to afford the proposed insurance premium to insure his hobby shop. Instead of purchasing insurance, Barney decides to set aside a specific amount of money to use in the event that property loss occurs. What do we call this type of risk management technique?a. P406 63 2. What is the present value of offer 2? a. P108 693.21 d. P408 693.21 b. P208 693.2 c. P308 693.21 3. Which of the two offers advantageous for your grandparents using the present value of the two offers? a. Offer 1 b. Offer 2 c. both offer 1 and offer 2 d. none of the above (For no. 4-5) Problem 2: Your uncle sold his rice field land in Kabasalan, Zamboanga Sibugay, and is planning to purchase residential land in Titay, Zamboanga Sibugay. He utilized his media account in selling the land and was able to receive two compelling offers: Offer 1: P1,000,000 down payments plus P2,500,000 lump-sum payment 5 years from now. Offer 2: P1,000,000 down payments plus P40,000 per month for 5 years Which among the two offers should your uncle pick if the payments will have an interest of 12% compounded monthly? Find the fair market value of the two offers. 4. What is the future value of offer 1? a. P1 676 234.17 b. P2 676 234.17 c. P3 676 234.17 d. P4 676 234.17 5. What is the future…Imagine you are working for an insurance companies. An individual is calming 10,000$ worth of stolen objects on an insurance claim, but you suspect he may only as suffer a loss of 6,000$. You have the ability to offer a settlement. If accepted, the claim is close and the individual receives such payment. If rejected, a court will decide the payment is 6,000$ or 10,000$. If the individual really lost 10,000$, there is 60% chance the court will decide in his favor. If the individual only lost 6,000$, there is 60% chance the court will only grant him that amount. Propose a settlement amount that will allow you to figure out if the individual is lying or not. Between 7600 and 8400